Cnooc Ltd. (NYSE: CEO), the Hong Kong and U.S. listed arm of China National Offshore Oil Corp., has reached an agreement to partner with Iceland’s Eykon Energy to explore for oil off the northeast coast of Iceland. China and Iceland in April signed the first free-trade agreement between the Middle Kingdom and a European country.

In addition to oil exploration, Iceland is receiving attention for its potential mineral deposits and for its location along what is becoming a new shipping route through the Arctic. The Financial Times notes that a proposal by Chinese mogul Huang Nubo to build a tourist resort in Iceland also could be revived.

Now that Eykon Energy has a deep-pocketed partner with offshore exploration experience the partnership should find out by this fall whether it will receive the exploration license. Iceland has no proved reserves of crude oil, either onshore or off, nor does the country claim any reserves of natural gas or coal. Virtually all the country’s electricity comes from hydropower or geothermal generation.

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