CNOOC to buy 33 pct of a Chesapeake Energy project

China's state-owned offshore oil and gas company is intensifying its search for oil in the western United States. CNOOC announced Sunday it will pay $570 million for a one-third stake in Chesapeake Energy Corp.'s drilling project in an emerging oil field in northeast Colorado and southeast Wyoming. Chesapeake, an oil and natural gas company based in Oklahoma City, will operate the 800,000-acre project in a pair of basins in a region called the Niobrara shale. CNOOC will pay two-thirds of the project's drilling costs, up to an additional $697 million.

In October, CNOOC paid $1.08 billion for a one-third stake in a Chesapeake drilling project in South Texas. Both deals give CNOOC access to an emerging source of oil in the western United States: shale deposits. Over the past several years, drillers like Chesapeake have learned to tap vast amounts of natural gas in these shale deposits.

More recently they have learned to adapt the new technology to also produce oil. Engineers have learned to drill down and then horizontally into layers of shale. They then pump a slurry of sand, water and chemicals into the well to crack the rock and allow oil and gas to escape.