Sinopec, Conoco to study shale-gas in Sichuan basin


Sinopec, Conoco to study shale-gas in Sichuan basin

BEIJING -- Conoco signed an agreement with Sinopec Group, to study shale gas exploration in the Sichuan basin, it said on its website, marking the official entrance of a third major international oil company into China's shale gas industry.

Shell signed a similar agreement in 2009 with PetroChina before it green lighted a more formal production sharing contract in March. Chevron signed a joint study agreement with Sinopec in April 2011 and began initial drilling in the first quarter. Other international oil majors such as BP and Total have said they are studying similar agreements, but have yet to announce any partnerships.

The Chinese government has targeted raising annual shale-gas output from practically nothing now to 6.5 Bcm by 2015 and as much as 100 Bcm by 2020. According to Wood Mackenzie, however, it could reach barely a 10th of its 2020 target the energy consultancy says 11 Bcm is more achievable. The country also has targeted increasing natural gas's contribution to the country's energy mix to 10% by 2020 from less than 5% as part of efforts to cut its dependency on coal, which accounts for around 70% of its energy mix. Under Sinopec's latest shale-gas agreement, ConocoPhillips will drill two wells in a 3,917.53 sq km section of the Qijiang block in China's southwestern Sichuan province, Sinopec said.

Chinese government has made several attempts to speed up development of its domestic shale-gas industry. In October, the Ministry of Land and Resources held a second shale-gas block auction aimed at fostering development of the sector among non-traditional Chinese energy companies. In November, the Ministry of Finance said it would offer subsidies to energy companies that develop shale gas in China. However, progress among international oil companies in China has been slow. Chevron plans to drill three more wells in shale formations in China, but doesn't expect rapid progress there, Chevron Gas and Midstream President Joseph Geagea said earlier this month, citing a shortage of geological data and insufficient infrastructure. Although Shell has said the results of its joint study agreement have been encouraging, the Chinese government hasn't yet announced approval of its production sharing contract with PetroChina.

Dow Jones Newswires

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