China National Offshore Oil Corp.'s (CNOOC) first deepwater drilling platform began operating in the South China Sea. The world-class vessel will operate at the Liwan 6-1-1 field, about 320 kilometers southeast of Hong Kong, in waters about 1,500 meters deep.

The development of platform 981 and China's strategy for exploiting deepwater oil and gas resources are inseparable. At a ceremony in Beijing marking the start of drilling, CNOOC (US:CEO) (HK:883) Chairman Wang Yilin and Wang Ming, the head of the Ministry of Land and Resources, both referred to the political significance of deepwater oil and gas resources and repeatedly stressed maintaining the sovereignty of China's territorial waters.

Several analysts said that high prices in recent years have ignited enthusiasm among oil companies for investing in the high-risk deepwater sector.

This explains the time and money spent on platform 981.

It is 117 meters high, 114 meters long and 89 meters wide. Its deck is the size of a standard soccer field, making it the largest piece of man-made exploration equipment that China has ever made.

The marine oil industry is watching two other key statistics for the platform: its maximum operating depth is waters 3,000 meters deep and its maximum drilling depth is 10,000 meters into the Earth. Before platform 981, China's oil platforms could only drill in waters up to 300 meters deep.

Su Jing, a CNOOC vice president involved with deepwater drilling, said there were only 17 to 20 vessels around the world as advanced as platform 981. But the vessel can be really considered among top three in the world. In six areas it ranks first in the world, such as its 9,000-ton variable load, a factor that greatly improves operations at sea.

Platform 981 also employs a unique underwater blowout prevention system. China appears to have learned from the 2010 oil spill in the Gulf of Mexico, where fluid and electrical control signals intended to close the leaking oil well all failed. When platform 981's equipment on the ocean floor system cannot receive radio or hydraulic signals, a device automatically ends operations by cutting the drilling pole.

Su said that there are pros and cons to this method. The biggest advantage is that it is safe. The disadvantage is that its misuse would cause significant financial losses. The system was developed by an American company, but has not been put into use on a global scale because of fears of the losses that could arise.

In addition, in order to maintain safety in harsh conditions, platform 981 is the first capable of withstanding a once-in-200-years typhoon. It can endure winds of 56 to 61 meters per second, far exceeding international specifications for its class.

Dr. Wu Xiaoyuan, of China State Shipbuilding Corp.'s Marine Engineering Department, said the platform was the first to use a positioning system that combines dynamic positioning and an anchor. In waters less than 1,500 meters deep, the anchoring system is used. When the depth exceeds 1,500 meters, a computer positioning system called DP3 is employed.

The anchor chain, 16% stronger than a previous version, is also considered one of the best in the world. Caixin learned that during testing, the platform encountered winds between 46 and 50 meters per second, but the anchored platform did not budge.

Wu said that another first for platform 981 is a system of sensors on its hull that relay data about the forces exerted on it at sea.

Despite the pride China has for platform 981, a source involved in its construction said the basic design came from Friede Goldman United, a leading U.S. company. The research institutes of CNOOC and China State Shipbuilding Corp. then upgraded the design. Work began in April 2008 at Shanghai Waigaoqiao Shipyard, and the platform was delivered in December 2010.

A source familiar with the design and construction of the vessel said there were significant modifications to the basic design. One key change was to increase the variable load from 7,000 tons.

Another was to upgrade the computer positioning system. These two key changes were the most critical in making the platform world class in the six categories.

Caixin learned from multiple sources that 40% of platform 981 is domestically produced. However, a CNOOC source involved in the project said the value of this portion is relatively low. The high-value drilling equipment, main engine and propellers were all imported.

Su said that Platform 981 has a design life of 30 years and an overall construction cost of about 5.8 billion yuan ($916 million). If oil prices stay at $100 per barrel, its cost will be recovered in seven to eight years.

However, a source from a foreign electrical company said that during the upgrade process, some of the main equipment had to be built twice, "expending a lot of time and money."