Finance & Investing
News Services
Newsletters
Get free industry updates via email.
Daily News
Weekly News
Equipment Updates
Weekly Job Register
Monthly Event Guide
Our privacy
pledge.


advertisement

China Unlikely to Replicate US Shale Gas Boom

change text size
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?

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


 - Petrofac Wins Shah Deniz 2 Project Work (Jul 29)
 - BP Profit Jumps But Warns Of Russia Sanctions Impact (Jul 29)
 - Kemp: Forecasts for Higher Oil Prices Misjudge the Shale Boom (Jul 28)
 Company: Shellmore info


 - Shell Makes Third Major Discovery in Norphlet Play in GOM (Jul 15)
 - Saudi Gas Development Plans Hit Hurdle as Shell Shelves Project (Jul 7)
 - Officials: German-Dutch RMR Pipeline Hit by Possible Theft (Jun 27)
 Company: Total S.A.more info
 - Norway's Aker Solutions to Take $211M Writedown (Jul 11)
 - Total CEO: Too Early to Call Kurdistan an Oil El Dorado (Jul 8)
 - Saudi Gas Development Plans Hit Hurdle as Shell Shelves Project (Jul 7)
 Company: ConocoPhillipsmore info


 - WWF: Arctic Oil Well Blowout Could Spread More Than 1,000 Km (Jul 25)
 - Karoon Reports Gas Discovery at Pharos-1 Well in WA-389-P ib Browse Basin (Jul 17)
 - ConocoPhillips Plans to Drill Pharos-1 Well in Permit WA-398-P offshore WA (May 16)
 Company: Chevron Corporationmore info
 - Chevron To Cut 225 Jobs In North Sea Oil Operations (Jul 16)
 - Chevron Expects Second-Quarter Profit To Rise (Jul 10)
 - Chevron Leaves Lithuania As Shale Gas Prospects Remain Uncertain (Jul 8)
 Company: ENImore info


 - Saipem Wins $850M of Drilling Contracts (Jul 29)
 - Unipetrol Sees Positive Impact from Acquisition of Rafinerska Stake (Jul 23)
 - N'Goma FPSO to Sail Away to Block 15/06 Offshore Angola Shortly (Jul 21)

Most Popular Articles
From the Career Center
Jobs that may interest you
Accounting Specialist - Operations Accounts Payable
Expertise: Accounting or Finance
Location: The Woodlands, TX
 
Safety and Risk Engineer
Expertise: Environmental Engineer, Risk Management, Safety Engineering
Location: Houston, TX
 
Principal- Technology Group Director
Expertise: Executive, IT - Sys Admin & Support
Location: Nashville, TN
 
search for more jobs