China Unlikely to Replicate US Shale Gas Boom

China Unlikely to Replicate US Shale Gas Boom

China is unlikely to replicate the shale gas boom of the United States in speed or scale, but low drilling costs and high local gas prices make it attractive to drill for unconventional gas reserves, says the top executive at one of the few foreign companies drilling for gas in China.

China has ambitious plans to sharply increase natural gas output in the coming decade by following in the footsteps of the U.S., where hydraulic fracturing has spurred a shale gas boom in recent years.

It recently set a target of producing 6.5 billion cubic meters of shale gas annually by 2015, up from virtually zero this year. It is also aiming to rapidly increase production to 60 billion-100 billion cubic meters a year by 2020.

However, these targets could be difficult to achieve due to a lack of technology and geological information about the reserves, Paul Atherley, managing director of AIM-listed Leyshon Resources Ltd., told Dow Jones Newswires Thursday.

"If they want to reach those targets, they need to get out there and drill. And that's just not happening at the moment."

Initial estimates by the U.S. Energy Information Administration show China's shale gas reserves are even larger than those of the U.S.

However, the economics of drilling for gas "are very attractive," he said.

Drilling an exploration well costs only around $1.5 million, about a third compared with Eagle Ford, Texas, he added.

Australia-based Leyshon this year acquired the right to explore for unconventional gas in the Ordos Basin in Shanxi province in central China.

The company plans to complete drilling the first two wells this year and has committed $25 million to drill a total of 13 wells in the block by 2014.

According to initial estimates, the block holds potential reserves of up to 3.8 trillion cubic feet of unconventional gas.

A tender for 20 shale gas blocks announced last month marked the first time China allowed foreign companies to participate in joint venture bids as minority partners. The first round in June 2011 was limited to state-owned companies.

The prospect of drilling for possibly the largest unconventional gas reserves in the world has already drawn interest from international majors such as BP PLC, Chevron Corp., Total SA, ConocoPhillips and Eni SpA.

In March, Royal Dutch Shell PLC signed the first major production-sharing contract, with China National Petroleum Corp., for exploration of a shale gas deposit in the Sichuan Basin.

Under a similar pact, the gas produced by Leyshon Resources will be sold to a local distributor at a fixed price of $7.2 per 1,000 standard cubic feet. In comparison, U.S. gas prices are below $3 now.

State-owned PetroChina holds an option to buy 40% of any project if Leyshon finds commercial gas reserves.

Copyright (c) 2012 Dow Jones & Company, Inc.

WHAT DO YOU THINK?

Click on the button below to add a comment.
Post a Comment
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

Related Companies
 Company: BP plcmore info


 - SapuraKencana Secures $125M of Drilling, Engineering & Construction Deals (Jun 28)
 - Explosion At Gas Plant in Mississippi, US (Jun 28)
 - Fire at Mississippi gas plant halts US Gulf Coast platforms (Jun 28)
 Company: Shellmore info


 - Unite to Ballot Over 200 North Sea Workers for Strike Action (Jun 8)
 - Niger Delta Militants Reject Offer Of Talks, Blow Up Chevron Well (Jun 8)
 - First Post-BG Shell Update Likely to be 'Short on Specifics' (Jun 3)
 Company: Total S.A.more info
 - Indonesia's Upstream Investment Appeal Fades (Jun 20)
 - Iran Oil Comeback That Startled Doubters Approaches Roadblock (Jun 16)
 - Kremlin Investor Show Attracts Top Oil Players, but Few Deals (Jun 16)
 Company: ConocoPhillipsmore info


 - ConocoPhillips, ENAP to Explore for Gas in Southern Chile (Jun 13)
 - Oil Investor Zukerman Dodged $45M in Taxes, US Says (May 25)
 - Canada's Oil Sands Producers Prepare to Re-Enter Evacuated Sites (May 23)
 Company: Chevron Corporationmore info
 - Empty Houses And Jobless Maids: Indonesia's Expat Exodus Gathers Pace (Jun 28)
 - Fire at Mississippi gas plant halts US Gulf Coast platforms (Jun 28)
 - Atkins Wins Engineering Support Services Contract for Chevron's WA Assets (Jun 23)
 Company: ENImore info


 - Algeria Oil And Gas Output On The Rise (Jun 26)
 - OneSubsea Secures Zohr EPC Contract (Jun 21)
 - Pakistan Seeks to Import More LNG to Address Supply Shortage (Jun 16)
Events  SUBSCRIBE TO OUR NEWSLETTER

Our Privacy Pledge
SUBSCRIBE



Most Popular Articles

From the Career Center
Jobs that may interest you
Senior Project Manager
Expertise: Project Management
Location: California, United States, CA
 
Executive Assistant
Expertise: Executive
Location: Houston, TX
 
Accounts Receivable Clerk
Expertise: Accounting
Location: Houston, TX
 
search for more jobs

Brent Crude Oil : $50.61/BBL 4.17%
Light Crude Oil : $49.88/BBL 4.24%
Natural Gas : $2.86/MMBtu 1.95%
Updated in last 24 hours