China produces gas at field disputed by Japan-source

BEIJING, Feb 1 (Reuters) China, which has brushed aside Japanese criticism over exploration at a disputed gas field, is producing gas there ''according to plan'', an official with China's leading offshore operator said today.

State-controlled CNOOC Ltd said in an annual strategic review that full operation at the Chunxiao field in the East China Sea had been due to start in 2006. But then he subsequently declined to comment on progress.

Asked if production had, indeed, begun, a CNOOC official who asked to remain anonymous said: ''It is proceeding according to plan'', but declined to comment further, saying the issue was too sensitive.

Beijing and Tokyo, at odds over a series of disputes stemming from Japan's invasion and 1931-1945 occupation of parts of China, disagree on where their sea boundary lies.

Although the Chinese drilling equipment is in undisputed waters, Tokyo fears it could suck away resources from Japan's exclusive economic zone.

Test extraction began in early 2006, and in August CNOOC's state-owned parent quoted a senior official on its Web site as saying production had begun. But his remarks were later removed and CNOOC declined to comment on their content or disappearance.

Hong Kong's Beijing-backed Ta Kung Pao newspaper said yeserday that full production at Chunxiao began in July and gas supply to the coastal Chinese cities of Ningbo and Shaoxing started in September, without citing sources.

Japan's Vice Trade Minister Takao Kitabata said today the Chinese had told Tokyo there was no development going on and that the newspaper report was inaccurate.

China's foreign ministry sidestepped questions on whether production had begun by pointing out that CNOOC was not operating in a disputed area.

''I don't understand the specific situation you raise, but the relevant gas field that China is developing is in China's near sea, on its continental shelf over which there is no dispute with Japan,'' spokeswoman Jiang Yu told a news briefing today.

The dispute has added to tensions rooted in Japan's often brutal occupation, although the two nations' prime ministers agreed recently to ''accelerate consultations'' about the boundary.

Estimates vary about how much gas lies in the Chunxiao field, but industry experts say there is probably far more than CNOOC's official estimate of 169 billion cubic feet -- or under 10 per cent of national output last year.

An industry source told Reuters last year that CNOOC aimed for first phase annual output of up to 2 billion cubic metres, or around 3 percent of total national production in 2006.

Japan, concerned it may be left behind, has granted test drilling rights to Teikoku Oil Co, which last year merged with rival INPEX to form Inpex Holdings Inc, to hunt for gas in the disputed waters, although drilling has not started.

REUTERS AKJ BST1558