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


 - Goldman Sachs: Big Oil Was Never That Big A Money-Maker (Sep 19)
 - APPEA Says Great Australian Bight Exploration Vital for Jobs, Investments (Sep 16)
 - GE O&G Confirms Deal to Supply Gas Compressors for Tangguh LNG Project (Sep 15)
 Company: Shellmore info


 - Petro Matad, Shell Agree Block IV, V Exit Deal (Aug 5)
 - RMT, Unite Begin 48-Hour Strike on North Sea Shell Platforms (Aug 4)
 - Shell CEO Says Interested In Yuzhno-Kirinskoye Field (Jul 11)
 Company: Total S.A.more info
 - Oil Firms Seen Spending More Next Year For First Time Since 2014 (Sep 23)
 - PNG Government Prefers Exxon, Total Pursue 2nd LNG Project (Sep 22)
 - Total Says to Cut Costs By A Further $1B (Sep 22)
 Company: ConocoPhillipsmore info


 - Pertamina's Upstream Arm Produces 15% More Oil, Gas Than Planned (Sep 19)
 - Technology Aiding Innovation, Sustainability at ConocoPhillips (Aug 25)
 - ConocoPhillips Confirms FAR Holds Pre-Emption Right for Senegal Project (Aug 23)
 Company: Chevron Corporationmore info
 - No Survivors Following Helicopter Crash Offshore Angola (Sep 28)
 - Nigeria Mulling Oil Assets Sale That Could Reshape The Industry (Sep 28)
 - Oil Industry Welcomes Indonesia's Tax Reform, But Says It's Not Enough (Sep 23)
 Company: ENImore info


 - Eni: Laarich East-1 Well Onshore Tunisia Has 2,000Bpd Capacity (Sep 19)
 - Eni Pledges Fewer Mishaps on Arctic Platform in Safety Shake-Up (Sep 14)
 - Eni Signs Concession Contract with Montenegro Government (Sep 14)
Events  SUBSCRIBE TO OUR NEWSLETTER

Our Privacy Pledge
SUBSCRIBE



Most Popular Articles

From the Career Center
Jobs that may interest you
Treasury & Credit Management Analyst
Expertise: Accounting|Financial Analyst|Financial Audit
Location: KCMO, MO
 
State Income Tax Counsel/Tax Advisor
Expertise: Accounting|Financial Analyst
Location: San Ramon, CA
 
United States Odessa: Area Resource Coordinator
Expertise: Operations Management|ROV Ops / Tech|Sales
Location: Odessa, TX
 
search for more jobs

Brent Crude Oil : $45.97/BBL 2.91%
Light Crude Oil : $44.67/BBL 2.74%
Natural Gas : $3/MMBtu 0.33%
Updated in last 24 hours