SOURCE: AAA Energy Inc.

March 05, 2007 09:00 ET

AAA Energy Inc. Provides Business Focus and Operational Overview

RENO, NV -- (MARKET WIRE) -- March 5, 2007 --AAA Energy Inc. (OTCBB: AAAE) has refocused its efforts in the natural resource arena on the premise of securing and developing a portfolio of oil and gas properties in new emerging markets. AAA Energy is poised and is positioning itself strategically in its first target market, the People's Republic of China

AAA Energy Inc. will focus its efforts on discoveries in emerging energy frontiers and horizons and provides the following operational overview for 2007:

China Focus

The People's Republic of China (China) is the world's most populous country and the second largest energy consumer behind the United States. Rising oil demand and imports have made China a significant factor in world oil markets. China is the world's most populous country and has a rapidly growing economy. China's real gross domestic product (GDP) is estimated to have grown at 9.9 percent in 2005. Economic forecasts remain strong for China, with real GDP expected to increase 9.9 percent in 2006. Inflows of foreign direct investment (FDI) into China totaled $86.1 billion in 2005, a new record and roughly double the level of 2001. China's merchandise trade surplus soared to $102 billion in 2005, its largest surplus ever and roughly three times larger than the 2004 figure.

Together with strong economic growth, China's demand for energy is surging rapidly. EIA forecasts that China's oil consumption will increase by almost half a million barrels per day in 2006, or 38 percent of the total growth in world oil demand. China is the world's third-largest net importer of oil behind the United States and Japan, an important factor in world oil markets.

With China's entry into the World Trade Organization (WTO) in November 2001, the Chinese government made a number of specific commitments to trade and investment liberalization which, when fully implemented, will substantially open the Chinese economy to foreign firms. In the energy sector, this will mean the lifting or sharp reduction of tariffs associated with imports of some classes of capital goods, and the eventual opening to foreign competition of areas such as retail sales of petroleum products.

China is the world's second-largest consumer of oil behind the United States, and the third-largest net importer of oil after the U.S. and Japan. China imported 95.80 million tons of crude oil in the first eight months of 2006, up 15.3 percent over the same period of last year. China also produces a significant amount of oil and contains sizeable proven oil reserves. China produced 122.93 million tons of crude oil in the first eight months of 2006 with a year-on-year growth of 1.8 percent.

According to Oil & Gas Journal (OGJ), China had 18.3 billion barrels of proven oil reserves as of January 2006, flat from the previous year. EIA estimates that China will produce 3.8 million barrels per day (Mmbbl/d) of oil in 2006, slightly higher than the previous year. Of this, 96 percent is expected to be crude oil. EIA estimates that China will consume 7.4 Mmbbl/d of oil in 2006, representing nearly a half million barrels per day increase from 2005. For 2006, EIA data forecasts that China's increase in oil demand will represent 38 percent of the world total increase in demand.

China's largest oil producing fields are mature and production has peaked, leading oil exploration activities to focus on developing largely untapped reserves in the western interior provinces and offshore fields. Roughly 85 percent of Chinese oil production capacity is located onshore. China's largest oil producing field, CNPC's Daqing field in northeastern China, accounts for more than 900,000 bbl/d, or one quarter of China's total crude oil production. Daqing is a mature oil field, and production levels have been reduced since 2004 while CNPC works to extend the life of the field. In April 2004, Chinese authorities announced several new oil discoveries in the existing Shengli field in northeastern China. These finds helped make Shengli, which is operated by Sinopec, the country's second-largest oil producing field, supplying more than 500,000 bbl/d according to OGJ's most recent estimate. CNOOC also produces more than 500,000 bbl/d from its offshore oil fields in the Bohai Bay and South China Sea.

Many foreign companies have been contracted to undertake oil exploration and production activities in China. According to Chinese law, however, China's national oil companies are entitled to take a majority (51 percent) stake in any commercial discovery, although they can choose to take a minority stake if they wish. The national oil companies can also take over field operations once the contracted firm has recovered its development costs. In offshore zones, CNOOC reserves the right to take over operations at any new discoveries, although certain shallow water locations such as the Zhao Dong field in the Bohai Bay are exempt. The Chinese government typically mandates a royalty fee of 12.5 percent for foreign companies involved in the oil sector, although discounts have been offered for development and exploration in more remote onshore areas, such as the western provinces of Qinghai and Xinjiang.

Recent oil exploration efforts have centered on developing onshore oil and natural gas fields in the western provinces of Xinjiang, Sichuan, Gansu, and Inner Mongolia as well as offshore fields in the Bohai Bay, Pearl River Delta, and South China Sea. In July 2006, PetroChina announced that it would open nine blocks in the Tarim basin in northwestern China's Xinjiang Uygur Autonomous Region for foreign companies to explore. The nine blocks cover more than 42,000 square miles and according to CNPC hold an estimated 43.9 billion barrels of potential oil reserves.

Recently, offshore oil exploration in China has been the greater focus of the oil majors. CNOOC has initiated several Production Sharing Contracts (PSCs) with international oil companies for exploration and development in the Bohai Bay region. ConocoPhillips holds the largest acreage in the area, with total discovered reserves estimated at 732 million barrels. ConocoPhillips has a 49 percent stake in the Bozhong 11/05 block and has produced 30,000 bbl/d of crude oil from its Peng Lai 19-3 field since 2002, which it expects will eventually produce 140,000 bbl/d. Other companies involved in oil exploration and production activities in the Bohai Bay region are Kerr-McGee, Apache, Chevron, and Royal Dutch Shell. Some independent analysts estimate that the Bohai Bay area holds more than 1.5 billion barrels of recoverable oil reserves.

CNOOC holds a 51 percent stake in the CACT Operators Group, which includes Eni and Chevron that produces 110,000 bbl/d from five offshore fields in the South China Sea. Several other oil exploration and production projects are underway in the South China Sea and Pearl River Delta area. Husky Energy, Devon Energy, and Kerr-McGee established a joint venture with CNOOC in December 2005 for deepwater oil and gas exploration in the South China Sea. CNOOC officials have announced that deepwater exploration is a major priority for the offshore oil company. CNOOC is also involved in exploration activities in the East China Sea, although territorial disputes with its neighbors have so far limited large-scale development of fields in the region.

AAA's China Venture

Under the direction of Dr. Earl W. Abbott, a member of the Company's Board of Directors and past President of the Nevada Petroleum Society, the Company embarked on an exploratory due diligence trip to China during the month of November 2006. Through networking opportunities with industry and government leaders in the oil and gas sector arranged by Mr. Albert Au, a Company director, the Company was presented with various opportunities in the prolific and resource rich Ordos Basin. Management has since returned to China to obtain additional technical data and reports on strategic oil and gas holdings located in the Ordos Basin and is currently evaluating the opportunities at hand with the a view to finalize an agreement on one or several of the prospects presented by the Company's Chinese partners.

Further Information

Please feel free to call investor relations toll-free on 1-877-990-1122 to receive a full corporate investor's package. Investors should take note that some of the key players within the Chinese frontier include but are not limited to; Apache, BP plc , Royal Dutch Shell plc, Chevron Corporation (Unocal), ENI SpA , Exxon Mobil Corporation, ConocoPhillips , Anadarko Petroleum Corporation, TOTAL Group, Kerr-McGee Corp, Husky Energy Inc., and Devon Energy Corp.

About AAA Energy Inc.

AAA Energy Inc. is a publicly traded natural resource exploration company with headquarters in Vancouver, BC and oncoming exploration offices in Calgary, Alberta and Xian, China. AAA Energy Inc. aims to secure and develop a portfolio of oil and gas properties in the People's Republic of China. The company is strategically positioning itself in China's Ordos Basin and will soon be ready to begin exploration of prime oil and gas land holdings in the basin. AAA Energy Inc. trades on the NASDAQ OTC BB under the ticker symbol: AAAE.

On behalf of the Board
Bruno Fruscalzo, President

Forward-Looking Statements

Statements in this news release that are not historical facts are forward-looking statements that are subject to risks and uncertainties. Words such as "expects," "intends," "plans," "may," "could," "should," "anticipates," "likely," "believes" and words of similar import also identify forward-looking statements. Forward-looking statements are based on current facts and analyses and other information that are based on forecasts of future results, estimates of amounts not yet determined and assumptions of management, including, but not limited to, the Company's belief that AAA Energy Inc. can identify and successfully negotiate leases for oil and gas properties in China, and that the Company can participate in the exploration of those properties. Actual results may differ materially from those currently anticipated due to a number of factors beyond the reasonable control of the Company. Additional information on risks and other factors that may affect the business and financial results of the Company can be found in filings of the Company with the U.S. Securities and Exchange Commission.

Contact Information

  • Contacts:
    AAA Energy Inc.
    Investor Relations
    Toll Free: 1-877-990-1122