BEIJING: Chinese state energy giant PetroChina plans to spend more than 10 billion yuan ($1.6 billion) on shale gas this year, sources with knowledge of the matter said, as domestic competition heats up after rival Sinopec announced a commercial find.
Faced with high drilling costs and the complexity of tapping shale gas, China has struggled to revolutionize its energy supplies. The top energy consumer wants to unlock what could be the world’s largest shale gas reserves by emulating the hectic success of the US shale boom.
PetroChina’s decision to triple its shale gas spending from expenditures on the unconventional fuel over the past few years comes just months after Sinopec Corp. lifted hopes that China is near a breakthrough by announcing a commercial find.
PetroChina, Asia’s largest oil and gas producer, has also lifted its 2015 shale gas output target to 2.6 billion cubic meters (bcm), up from the previous 1.5 bcm, according to a company official and a government source.
That would represent only about 2.3 percent of China’s total natural gas output of around 113 bcm last year.
“PetroChina wants to play catch up after Sinopec’s success,” said a government source who has been briefed on PetroChina’s plans.
Since around 2010, PetroChina has spent about 3 billion yuan ($482.39 million) total on pilot shale drilling, according to both sources. The state giant, which makes up around 70 percent of China’s total natural gas output, has so far largely focused on growing its conventional oil and gas portfolio.
PetroChina will focus on two pilot zones — Weiyuan-Changning in southwest Sichuan basin and Zhaotong in Yunnan province.
“PetroChina has over the past four years improved understanding of the shale resources and achieved some technological breakthroughs,” said Mao Zefeng, joint company secretary of PetroChina.
“We’re stepping up shale gas development this year,” he said.
Sinopec’s shale work has been concentrated in the Fuling area of Chongqing municipality in southwest China, also part of the Sichuan basin, one of the most promising geological zones for the unconventional fuel. Sinopec has drilled nearly 30 pilot shale gas wells in the Fuling area. The main challenge for both Sinopec and PetroChina is to cut the drilling cost per well to under 50 million yuan ($8 million), half the current hefty rates averaging around 80-100 million yuan, experts say.
That requires a factory-style operation and technological improvements to shorten the drilling period for each well.
At Fuling, Sinopec is now able to drill up to six wells simultaneously from one platform, cutting down the drilling time for a single well to 89 days from 100 days.
Even so, Sinopec has only managed to reduce its per-well costs to about 80 million yuan, an amount that is economic only with a government subsidy of 0.40 yuan per cubic meters of production, industry officials said.
China pumped about 113 bcm of natural gas last year, of which shale gas was a meagre 200 million cubic meters, according to official data.
The government has set shale gas production targets at 6.5 bcm for 2015 and at 60-100 bcm for 2020.
PetroChina hikes shale gas spending to more than $1.6bn
PetroChina hikes shale gas spending to more than $1.6bn
Saudi minister at Davos urges collaboration on minerals
- The reason of the tension of geopolitics is actually the criticality of the minerals
LONDON: Countries need to collaborate on mining and resources to help avoid geopolitical tensions, Saudi Arabia’s minister of industry and mineral resources told the World Economic Forum on Tuesday.
“The reason of the tension of geopolitics is actually the criticality of the minerals, the concentration in different areas of the world,” Bandar Alkhorayef told a panel discussion on the geopolitics of materials.
“The rational thing to do is to collaborate, and that’s what we are doing,” he added. “We are creating a platform of collaboration in Saudi Arabia.”
The Kingdom last week hosted the Future Minerals Forum in Riyadh. Alkhorayef said the platform was launched by the government in 2022 as a contribution to the global community. “It’s very important to have a global movement, and that’s why we launched the Future Minerals Forum,” he said. “It is the most important platform of global mining leaders.”
The Kingdom has made mining one of the key pillars of its economy, rapidly expanding the sector under the Vision 2030 reform program with an eye on diversification. Saudi Arabia has an estimated $2.5 trillion in mineral wealth and the ramping up of extraction comes at a time of intense global competition for resources to drive technological development in areas like AI and renewables.
“We realized that unlocking the value that we have in our natural resources, of the different minerals that we have, will definitely help our economy to grow to diversify,” Alkhorayef said. The Kingdom has worked to reduce the timelines required to set up mines while also protecting local communities, he added. Obtaining mining permits in Saudi Arabia has been reduced to just 30 to 90 days compared to the many years required in other countries, Alkhorayef said.
“We learned very, very early that permitting is a bottleneck in the system,” he added. “We all know, and we have to be very, very frank about this, that mining doesn’t have a good reputation globally.
“We are trying to change this and cutting down the licensing process doesn’t only solve it. You need also to show the communities the impact of the mining on their lives.”
Saudi Arabia’s new mining investment laws have placed great emphasis on the development of society and local communities, along with protecting the environment and incorporating new technologies, Alkhorayef said. “We want to build the future mines; we don’t want to build old mines.”
