China Back to Drawing Board as Shale Gas Fails to Flow
The U.S. Energy Information Administration estimates China is sitting on 1,115 trillion cubic feet of shale gas, nearly double the size of the reserves in the United States.
Big Spend, Small Return
The problem for Beijing is that PetroChina and Sinopec are reluctant to devote resources to shale gas after experiencing hefty exploration costs for low output in pilot drilling.
China has to date spent around 10 billion yuan ($1.6 billion) to drill around 130 shale gas wells. PetroChina and Sinopec, which hold the rights to the most prospective shale acreage in China, have drilled most of them.
Only a handful of those wells are producing over 40,000 cubic metres of gas a day, deemed a break-even level for the $13 million to $16 million each well costs, officials said.
To achieve an official target of 6.5 bcm of shale gas output by 2015, China would need to spend 126 billion yuan ($20 billion) on a total of 1,800 wells, provided each produces 10,000 cubic metres per day, according to industry estimates.
Neither PetroChina nor Sinopec have plans to drill close to that number.
PetroChina, Asia's biggest oil-and-gas producer, had planned to drill close to 400 wells over the next few years in the Changning area of southwest Sichuan province, a government-designated shale gas pilot zone, but is only expected to complete the first 20 by end of this year.
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