China is stepping up its shale development efforts, with a new centre reportedly planned at Fuling and new partnership agreements between key regional players
China’s biggest shale gas producer, Sinopec, is reportedly seeking to raise long-term production by investing almost US$50 million in a research base near Fuling, its biggest operational shale project. Last year, output from Fuling, which is located in the Chongqing municipality adjacent to Sichuan Province, totalled about 5 bcm, Reuters reported, although no official figure has been published so far for the whole of 2016. National oil company (NOC) Sinopec said earlier that Fuling had produced 3.76 bcm in the January-September period of 2016. The company is seeking to strengthen its position as China’s leading shale gas developer by building the research facility, Reuters reported, quoting rival shale developer China National Petroleum Corp. (CNPC).
Sinopec has not disclosed anything about the Fuling research project and CNPC’s announcement on its own website provided few details.
Sinopec will reportedly spend 339 million yuan (US$49 million) on the research centre in an effort to oversee the expansion of production capacity at Fuling.
Sinopec had previously said it was targeting second-phase development of the Fuling project, which is due to be completed this year and which is anticipated to raise output capacity at the field to 10 bcm per year.
Heading south Following the news at Fuling, CNPC then signed an agreement with provincially owned Sichuan Energy to explore and develop the southwestern province’s shale gas reserves jointly.
Based on the agreement, CNPC’s local upstream arm PetroChina Southwest Oil and Gas will develop shale gas businesses with Sichuan Energy in the Sichuan Basin, with activities to include pipeline construction. Again, the two sides have provided few details about the agreement, but industry sources have said the companies will develop shale gas plays in the province’s south.
CNPC wants to boost its production of the unconventional gas to 10 bcm by 2020 with a focus on shale-rich regions in south Sichuan that surround the cities of Neijiang, Zigong, Yibin, Luzhou, Leshan, Ziyang and Meishan. This would represent a more than fourfold increase on the 2.3 bcm it produced in 2016 from 120 wells at 26 well pads. Meanwhile, CNPC’s listed arm PetroChina has begun construction of another gathering pipeline to serve additional wells in its Changning-Weiyuan shale gas block, Interfax China reported. Changning-Weiyuan, which is also located in Sichuan Province, is PetroChina’s most productive shale gas block to date, yielding 2.5 bcm in 2016. Development has been slow, however. The NOC first started exploratory drilling in Changning-Weiyuan in 2010.
Sinopec already operates a 136-km pipeline connecting Fuling with its pipeline system serving East China’s provinces.
The Fuling and Changning-Weiyuan blocks are both located in mountainous terrain that is challenging to drill and the shale plays are found at considerable depths. Production has improved as the two NOCs have honed their technology and grown their expertise. The companies have said they expect to be producing 10 bcm per year of shale gas each by 2020. China’s National Energy Administration (NEA) has set a target for the country to be producing a total of 30 bcm per year of shale gas by the same year.