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?

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


 - BP, Emerson Extend Automation Services Agreement (Aug 26)
 - Iraq Oil Minister Says $9B in Arrears Paid to Oil Firms (Aug 25)
 - BP 1H Oil Output At Azeri Fields Dips To 641,000 Bpd (Aug 10)
 Company: Shellmore info


 - Shell Lifts Force Majeure on Gas Supplies to Nigeria's NLNG (Aug 21)
 - BG Group Posts 58% Earnings Slump, Increases Production (Jul 31)
 - TomCo Appoints New Director and Chairman (Jul 17)
 Company: Total S.A.more info
 - Total Sells North Sea Gas Pipelines For $907M (Aug 27)
 - Total Abandons Shale Gas Exploration at Well in Denmark (Aug 18)
 - Total on Track to Start Bulgaria Offshore Drill in Early 2016 (Aug 17)
 Company: ConocoPhillipsmore info


 - Oil & Gas UK Appoints 4 New Board Members (Aug 25)
 - Sources: ConocoPhillips to Seek Buyers for Stake in Indonesian Oil, Gas Blo (Aug 11)
 - ConocoPhillips Reports Better-Than-Expected Profit in Oil Crash (Jul 30)
 Company: Chevron Corporationmore info
 - Oil & Gas UK Appoints 4 New Board Members (Aug 25)
 - Tempo Australia Provides More Personnel for Gorgon LNG Project in WA (Aug 21)
 - Monadelphous Bags Contract for Chevron's Barrow Island Assets in WA (Aug 17)
 Company: ENImore info


 - Iraq Oil Minister Says $9B in Arrears Paid to Oil Firms (Aug 25)
 - ENI To Start Producing From Arctic Oilfield Off Norway In A Few Weeks (Aug 19)
 - Saipem Says Milan Prosecutors Open Corruption Probe On Brazil Contract (Aug 12)
Events  SUBSCRIBE TO OUR NEWSLETTER

Our Privacy Pledge
SUBSCRIBE



Most Popular Articles

From the Career Center
Jobs that may interest you
Sr. Project Manager - Pipeline Construction
Expertise: Asset Integrity Engineer|Project Management|Risk Management
Location: Houston, TX
 
West Coast Account Manager
Expertise: Business Development|Sales & Marketing
Location: Seattle, WA
 
Proposal Engineer Manager
Expertise: Engineering Manager|HSE Manager / Advisor|Naval Architecture
Location: Parsippany-Troy Hills, NJ
 
search for more jobs

Brent Crude Oil : $50.05/BBL 5.23%
Light Crude Oil : $45.22/BBL 6.25%
Natural Gas : $2.72/MMBtu 3.42%
Updated in last 24 hours