Drilling Furiously: Chinese Energy Giants Turn Upbeat On Shale Gas

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Sinopec and PetroChina have upgraded their outlook on China's shale gas industry, citing steadily declining costs, but stopped short of predicting a near-term boom.


HONG KONG, Aug 29 (Reuters) - China's energy heavyweights Sinopec Corp and PetroChina have upgraded their outlook on the country's shale gas industry, citing steadily declining costs, but stopped short of predicting a near-term boom.

China, estimated to hold the world's largest technically recoverable shale resources, is hoping to replicate the shale boom that has transformed the energy landscape of the United States. Industry experts caution that it would be much more difficult for China to monetise its shale gas reserves than the U.S. as it faces serious challenges from water shortages to complicated geological structure and a lack of infrastructure.

But top executives at China's two biggest energy companies conveyed a bullish assessment of the country's shale gas potential this week, citing rapidly falling drilling costs and rising domestic gas prices. That's a far cry from two years ago when they overwhelmingly focused on the hurdles faced by China.

"It took the U.S. nearly four decades to achieve large-scale production. We are at the early stage, but we don't need to spend three decades. Cost will come down sharply," Sinopec Chairman Fu Chengyu told reporters at the firm's interim results briefing in Hong Kong on Monday.

"We have found that there is big room for cost reduction... Also domestic gas prices are being raised, so these two factors will lead to greater investment," he said.

The cost of shale gas drilling at Sinopec's Fuling field in southwestern China - the country's largest shale gas project - has been falling steadily to about 60 million yuan ($9.8 million) per well, Fu said.

That is still double the average shale gas drilling cost in the U.S. but represented a significant fall from 100 million yuan in China just several years ago, analysts say.


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