PetroChina finds shale gas reserves

Shale gas is produced by injecting wells with highly pressurised water and chemicals, a process known as “fracking” that cracks open rock to release natural gas. The technique has revolutionised energy markets in countries such the US, the world’s largest producer of shale gas, by driving down natural gas prices.

China does not yet have any shale gas wells producing commercially, but several companies have exploratory projects underway, including Sinopec, PetroChina, Royal Dutch Shell, BP and Chevron. China has more shale gas reserves than any other country in the world, with 1,275tr cu ft of recoverable shale gas reserves, according to estimates from the US Energy Information Administration. That is enough to supply China for more than 300 years, based on current consumption levels.

Beijing sees natural gas as a part of the solution for China’s growing energy needs, and the state has encouraged the development of “unconventional” natural gas sources such as shale gas and coal-bed methane. China’s shale gas production will eventually exceed that of the US, according to remarks by Fu Chengyu, chairman of Sinopec, at a conference on Wednesday.

Gavin Thompson, head of China gas research for consultancy Wood Mackenzie, said the initial results in southern Sichuan suggest the acreage could be “comparable with attractive shale plays globally” once horizontal wells were drilled. Most of the wells drilled so far are vertical, and horizontal wells are underway, according to PetroChina.

“These are quite crucial times for shale gas development in China,” he said. “If PetroChina or Sinopec has really good success over the next one to two years with their [shale gas] wells, we may see a much harder push to develop shale.”

Despite the apparent resources, some analysts are sceptical about how soon China can make shale gas production profitable given the relatively low price of natural gas in China and the lack of pipeline infrastructure. Two geologists contacted by the FT said that 10,000 cu m per day was not large relative to onshore US fields, adding that production from shale gas wells declines rapidly over the lifetime of the well.

PetroChina’s southern Sichuan shale acreage includes the Changning and Weiyuan blocks. On the nearby Fushun-Yongchuan block, a joint venture project between PetroChina and Shell has drilled several exploration wells for shale gas, at least one of which has gas production, according to media reports earlier this year. Shell declined to comment on the production of the block, saying that “exploration work is ongoing”.

FT