China's shale gas: different approaches

Wood Mackenzie has reviewed recent activity in China’s shale gas sector, highlighting the different strategies adopted by two Chinese NOCs, PetroChina and Sinopec.

In a presentation at Gastech 2014 in South Korea, the research firm noted that strong demand for gas is continuing to attract investment in China’s upstream sector, however divided priorities may further delay progress in domestic unconventional gas projects.

PetroChina

“While much ‘hype’ surrounds China’s shale sector, on the ground investment is focused elsewhere. PetroChina - comfortably the largest shale gas acreage holder - devoted just one percent of its overall 2013 budget to shale gas. Conventional and tight gas opportunities are top of its priority list, and considering its recent performance it’s hard to argue with that strategy,” explained Craig McMahon, Head of Asia Upstream research for Wood Mackenzie.

McMahon noted considerable growth in tight gas production and PetroChina’s recently announced discovery of 10 trillion ft³ of conventional gas as evidence of the company’s approach.

Sinopec

Wood Mackenzie added that PetroChina is not the only shale gas player in China: “Sinopec’s acreage position may be smaller, but it is now setting the pace in the Sichuan Basin. The Fuling discovery will be the first commercial shale development in China,” McMahon explained. Sinopec is now set to ramp up drilling and investment on the asset and could be producing material volumes as early as 2015.

Conclusion

In conclusion, McMahon remarked: "It is interesting to note the different strategies of China’s two major NOCs on domestic shale. International Oil Companies (IOCs) are making less progress, as they struggle with an investment climate that does little to support their strategic goals. But with PetroChina’s attention elsewhere, might they be better utilising IOC expertise and capital to unlock China’s vast shale resource?"

While IOCs involvement in China’s shale gas sector to date is small compared with Chinese NOCs, with the government intent on stimulating private investment and a growing dependence on energy imports, that situation could easily change.

Adapted from press release by Katie Woodward

Read the article online at: https://www.worldpipelines.com/business-news/27032014/chinese_nocs_and_shale_gas_71/