CNOOC starts its first China shale-gas exploration project

Jan 12, 2012 12:00 AM

by Guo Aibing

CNOOC, China’s biggest offshore energy producer, started drilling at its first shale-gas project in the country, joining rivals including China Petroleum & Chemical in the search for unconventional natural gas.
Exploration started Dec. 29 in the eastern Anhui province, China National Offshore Oil, CNOOC’s parent, said. The shale-gas project is also the Hong Kong-listed unit’s first onshore venture, it said.

China, estimated to hold more natural gas trapped in shale than the US, has yet to produce the fuel commercially. Chinese energy explorers have been seeking shale technology and expertise by buying stakes in overseas fields, including acquisitions of Chesapeake Energy assets by CNOOC.
“It may take more than five years for CNOOC to turn this exploration into real production, but the key message here is CNOOC signals a new direction on where the company will move in the future,” said Neil Beveridge, an energy analyst. “CNOOC will count heavily on unconventional oil and gas for growth down the road.”

Chinese shale may hold 1,275 tcf, or 12 times the country’s conventional natural gas deposits, the US Energy Information Administration said in April. China’s ‘technically recoverable’ reserves are almost 50 % more than the 862 tcf held by the US.
China National Petroleum, the country’s biggest energy producer, agreed in June to form a venture with Royal Dutch Shell to improve its drilling efficiency after taking 11 months to complete the nation’s first shale-gas well.

Exploration right
The project, located in Anhua’s Wuhu city, covers an area of 4,800 sq km, China National Offshore said. The company’s application for the right to explore the area was approved by Ministry of Land and Resources in December 2010.
CNOOC joined China’s first shale-gas exploration rights auction in June and lost to China Petroleum and Henan Provincial Coal Seam Gas Development and Utilization Sinopec, as China Petroleum is known, and Henan Provincial won the rights to search for the fuel in the Nanchuan and Xiushan blocks.

The Nanchuan block, an area of 2,198 sq km, straddles Chongqing municipality and Guizhou province in the southwest, while Xiushan, spanning Chongqing, Guizhou and Hunan, has an area of 2,039 sq km, the land ministry said in June. China has scheduled a second auction for January, Zhang Dawei, deputy director of oil and gas research at the Ministry of Land and Resources, said in December.
CNOOC has bid for at least $ 16 bn of assets overseas since the beginning of 2010, including stakes in Chesapeake’s Niobrara and Eagle Ford shale projects.

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