SAN ANTONIO, Texas - U.S. oil company ConocoPhillips is looking into expanding its China operations to include shale gas, a company executive said Tuesday.
A move by ConocoPhillips would help China--a country with no commercial shale gas production in 2011--along on its ambitious target to produce 229.5 billion cubic feet a year of shale gas by 2015. ConocoPhillips, which currently holds stakes in Chinese offshore drilling projects, is "looking into expanding into shale" in the country, Mark Nelson, ConocoPhillips's vice president of commercial and sustainable development, told Dow Jones Newswires.
Mr. Nelson spoke on the sidelines of the U.S.-China Oil & Gas Industry Forum in San Antonio, where Chinese government officials and energy executives met with their U.S. counterparts to discuss energy policy and attempt to form partnerships. During the forum, ConocoPhillips took three buses of Chinese delegates on a tour of the Eagle Ford shale region south of San Antonio, where oil rigs and hydraulic fracturing work crews dot the drought-stricken landscape. The area's booming oilpatch has been instrumental in bringing U.S. oil production to its highest level in more than a decade.
China is expected to put 17 domestic shale gas blocks up for auction in the coming weeks, hoping to entice U.S. energy firms to form partnerships with domestic companies and kickstart the sort of shale gas revolution that the U.S. has undergone in the past decade. ConocoPhillips, Chesapeake Energy Corp., EOG Resources and others have used advances in drilling technology to unlock natural gas from shale formations throughout the U.S., sending the country's natural gas output to 66 billion cubic feet a day in 2011, up from 56 billion cubic feet a day in 2001, according to the U.S. Energy Information Administration. Without shale gas, which accounts for about 40% of domestic natural gas output, production of the commodity would have declined and the U.S. would have had to import massive quantities of liquefied natural gas, experts say.
The energy needs in the world's second-largest economy continue to grow, with Chinese consumers using 39 billion cubic feet a day of natural gas in the first quarter according to the EIA.
But even if ConocoPhillips and other U.S. firms decide to partner with CNOOC Ltd. and other Chinese national oil companies to develop the country's estimated 1.28 trillion cubic feet of recoverable shale gas, China still may not hit its 2015 production target, which some executives at U.S. energy producers working in China have called too ambitious for the country's current capability.
"The shale gas target is too aggressive," said one executive for a U.S.-based oil and gas firm doing business in China who declined to be named, citing ongoing business ties. "They won't get that far."
China has little experience in drilling for shale, and its workforce lacks the technology and engineering know-how needed, said Julio Friedmann, chief energy technologist at the Lawrence Livermore National Laboratory, who has visited China to conduct technical analysis on the country's shale potential.
"Chinese companies, including CNOOC, are finding it challenging to quickly learn about shale-gas and tight hydrocarbon tech," Mr. Friedmann said. "The transfer of knowledge and know-how is limited by language, culture and different commercial goals."
Despite the skepticism, a Chinese official on Tuesday reaffirmed the government's target.
"This goal can be attained," said Zhang Yuqing, deputy administrator of China's National Energy Administration. "We would like to utilize U.S. technology to increase our development. We would like to learn from you and establish a good framework for shale gas development."
Copyright (c) 2012 Dow Jones & Company, Inc.
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