PetroChina surpasses expectations in the Sichuan basin

Drilling rig in China
Source: DollarPhotoClub

With 1,115 trillion cubic feet of gas (tcf), China has the richest shale gas deposits in the world but, so far, the country’s ambition to replicate North America’s shale boom has been dogged by bureaucracy, lack of technical know-how, and difficult geology. In view of these obstacles, earlier this year, the country was forced to half its target of producing 60 billion cubic meters by 2020.

Recently, however, the news turned from bad to promising. According to the vice director of the National Energy Administration Zhang Yuqing, China’s shale gas output will likely hit 6.5 billion cubic meters next year, up from an estimated output between 1 billion and 1.5 billion cubic meters this year.

PetroChina Co., the country’s biggest oil and gas producer, is on course to surpass a 2.6 billion cubic meter target for shale gas production in 2015 from fields in the southwest province of Sichuan – Bloomberg reported today.

China’s activities in shale exploration have so far concentrated on the Fuling shale gas field in Chongqing, and on the Sichuan basin.

The nation’s largest shale-producing project is the Fuling field. It is being explored by China’s state-owned giant Sinopec and is believed to have reserves of 2.1 trillion cubic meters. Based on these estimates, Sinopec is planning to realize an annual production capacity of 10 billion cubic meters of gas by 2017.

The exploration in the Sichuan basin is carried out by PetroChina, which holds nine shale gas exploration rights in Sichuan and Chongqing. Four have started or are close to commercial production.

“We are about a year and a half behind Sinopec in shale gas exploration because we concentrated our resources on the Longwangmiao natural gas project in Sichuan,” PetroChina President Wang Dongjin said in August. “We officially begin our shale gas exploration this year, and hopefully we will catch up in exploration production.”

The ultimate productivity of the Sichuan is estimated to be about half of that of the Fulling. PetroChina – which sits atop approximately 3.9 trillion cubic meters of shale gas reserves in the Sichuan – aims to produce 5 billion cubic meters by 2017 and 12 billion cubic meters by the end of the decade, Xie Jun, deputy general manager of unit Southwest Oil & Gasfield Co. told Bloomberg.

The company’s exploration strategy involves reaching for the ‘low hanging fruit’ first, by concentrating on extracting the shallower deposits at less than 4,000 meters (13,124 feet) deep, which are expected to hold 1.5 billion cubic meters of gas.

So far the wells in the Sichuan basin have proved rather expensive, with a single well costing a little over 10.6 million dollars; compared to 7.6 million dollars for an average well in the Marcellus shale region. However PetroChina believes that with the implementation of large-scale drilling and once the geology of the basin is better understood, the costs of exploration will fall to economically acceptable levels.

Over the next eighteen months, PetroChina is planning on investing 13 billion yuan ($2.1 billion) on Sichuan shale gas exploration and production.

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