US links up with Chi­nese firm in shale gas project

China Daily (Canada) - - BUSINESS - By DU JUAN du­juan@chi­nadaily.com.cn

The boom­ing US shale gas in­dus­try is to em­brace a new part­ner — China’s Shen­hua En­ergy Co Ltd, the big­gest coal pro­ducer in the world.

The Chi­nese en­ergy gi­ant an­nounced that it will join with an en­ergy firm called En­ergy Corp of Amer­ica to de­velop a shale gas project lo­cated in the state of Penn­syl­va­nia. Ac­cord­ing to a state­ment re­leased by Shen­hua, the com­pany plans to in­vest $90 mil­lion to set up a sub­sidiary for the new project.

The project, which in­cludes 25 shale gas wells, is ex­pected to pro­duce 3.8 bil­lion cu­bic me­ters of gas in its first 30 years of op­er­a­tion.

Shen­hua had al­ready se­cured a gas project in Cen­tral China’s Hu­nan prov­ince at the be­gin­ning of this year. It plans to ex­pand its shale gas busi­ness in South­west China’s Guizhou prov­ince, the state­ment said.

How­ever, Shen­hua has never been in­volved in for­eign shale gas projects be­fore, and nei­ther have other coal firms in China.

Spurred by the ap­pli­ca­tion of new tech­nol­ogy, in­clud­ing hy­draulic frac­tur­ing and hor­i­zon­tal drilling, US un­con­ven­tional gas pro­duc­tion has been on a con­tin­u­ous rise start­ing from 2007.

David Sandalow, as­sis­tant sec­re­tary for pol­icy and in­ter­na­tional af­fairs at the US En­ergy Depart­ment, said ear­lier this year that the US spent 20 years be­fore the shale gas in­dus­try achieved com­mer­cial­ized pro­duc­tion driven by in­vest­ment from the gov­ern­ment.

Like other in­dus­tries, in­no­va­tion is the key to solv­ing en­vi­ron­men­tal prob­lems dur­ing shale gas ex­plo­ration, he said.

Ear­lier this month, the Na­tional En­ergy Ad­min­is­tra­tion said China has made much progress in shale gas de­vel­op­ment in Chongqing city, which is ex­pected to reach a ca­pac­ity of 5 bil­lion cu­bic me­ters of the en­ergy source by 2015.

Shen­hua is not the first Chi­nese com­pany to in­vest in North Amer­ica’s shale gas busi­ness. At the be­gin­ning of 2012, State-owned China Petroleum & Chem­i­cal Corp, oth­er­wise known as Sinopec Co, ac­quired one-third of Devon En­ergy Corp’s stake in five shale projects in the US.

A Sinopec ex­pert who de­clined to be iden­ti­fied said that by the end of 2015, the com­pany’s shale gas out­put will reach 2 bil­lion cu­bic me­ters, ac­count­ing for one-third of the coun­try’s shale gas pro­duc­tion tar­get. Wang Xiaokun, an en­ergy an­a­lyst at do­mes­tic com­modi­ties con­sul­tancy Sub­lime China In­for­ma­tion Group Co Ltd, said China will have a nat­u­ral gas short­age of about 10 bil­lion cu­bic me­ters this year, which has led to ac­cel­er­ated de­vel­op­ment of shale gas projects.

“Shale gas is an im­por­tant un­con­ven­tional nat­u­ral gas re­source. It has to be re­searched and de­vel­oped in China un­der the cur­rent en­ergy struc­ture,” she said. “Fur­ther­more, more at­ten­tion should be paid to the de­vel­op­ment of the down­stream busi­nesses of the shale gas in­dus­try.”

The In­ter­na­tional En­ergy Agency, the Paris-based ad­viser to oil-con­sum­ing coun­tries, pre­dicts that the US, fu­eled by boom­ing out­put from shale re­sources, will over­take Rus­sia and Saudi Ara­bia to be­come the world’s top en­ergy pro­ducer by 2015 and be close to en­ergy self-suf­fi­ciency within two decades.

China’s Min­istry of Land and Re­sources es­ti­mates that the coun­try holds around 25 tril­lion cu­bic me­ters of shale gas re­serves, which is 32 per­cent big­ger than that of the US.

How­ever, the huge re­source re­mains un­tapped be­cause of ge­o­log­i­cal com­plex­ity and tech­no­log­i­cal ob­sta­cles.

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