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China shale production 'five years away'

01st June 2012

China is some way off turning shale gas into recoverable reserves and must look elsewhere to meet demand, say experts.

China must keep buying overseas energy assets to fuel its economy

Chinese oil giant, PetroChina may take five years to figure out ways to unlock the world’s largest natural-gas reserves trapped in shale rock, meaning China must keep buying overseas energy assets to fuel the second-biggest economy, according to reports.

“We still have a long way to go in turning possible shale resources into recoverable reserves,” Zhou Mingchun, chief financial officer at China’s largest oil and gas company, said in an interview in Beijing. PetroChina will pursue energy assets “wherever and whenever they become available”, Bloomberg reported.

Welders work inside a steel construction tube at Cnooc Ltd.'s marine engineering facility in Shenzhen, China. China, estimated to hold triple the shale reserves of the US, has yet to produce the fuel commercially because its drillers lack technology and face tougher geology . Explorers including Cnooc Ltd. have bid for USD 100 billion of energy assets from Australia to Canada since 2008, including so-called unconventional resources, to boost reserves and gain expertise.

Welders work inside a steel construction tube at Cnooc Ltd.'s marine engineering facility in Shenzhen, China. China, estimated to hold triple the shale reserves of the US, has yet to produce the fuel commercially because its drillers lack technology and face tougher geology. Explorers including Cnooc Ltd. have bid for USD 100 billion of energy assets from Australia to Canada since 2008, including so-called unconventional resources, to boost reserves and gain expertise.

China, estimated to hold triple the shale reserves of the U.S., has yet to produce the fuel commercially because its drillers lack technology and face tougher geology. Explorers including Cnooc Ltd.  have bid for USD100 billion of energy assets from Australia to Canada since 2008, including so-called unconventional resources, to boost reserves and gain expertise.

“We’ll need three to five years to develop a full-fledged method to overcome a series of challenges, including looking for gas and recovering gas, before we decide on the next step,” Zhou said May 29 at the head office of the company thats ranks as the world’s third largest by market value. “We’re taking a proactive and cautious stance.”
PetroChina’s parent, China National Petroleum Corp., tappedRoyal Dutch Shell Plc (RDSA) for help in sinking the nation’s first horizontal well last year. Ties were strengthened in February when PetroChina agreed to buy a 20 percent stake in Shell’s Groundbirch shale-gas project in Canada.

Such alliances serve to transfer expertise on hydraulic fracturing, or fracking, which involves blasting water, sand and chemicals underground to release gas from sedimentary rock.

A lack of technology at home prompted state-run Cnooc and China Petrochemical Corp. to invest more than USD 5.7 billion in unconventional oil and gas assets overseas. China Petrochemical, known as Sinopec Group, also held talks with Chesapeake Energy Corp. (CHK) and its North American competitors about acquiring shale.

PetroChina has “no contact with Chesapeake in terms of mergers and acquisitions,” Zhou said. Still, “both sides have paid attention to each other,” he said, without elaborating.

China holds 25.1 trillion cubic meters of exploitable shale reserves, the country’s Ministry of Land and Resources said March 1, citing a nationwide survey.
The U.S. Energy Information Administration previously said China may hold 1,275 trillion cubic feet (36 trillion cubic meters) of technically recoverable gas, 12 times the country’s conventional gas deposits, according to an April 2011 report. That’s almost triple the 482 trillion cubic feet in the U.S., according to a Jan. 23 estimate by the EIA. It didn’t give a revised figure for China.

 

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