Petroleum Economist Maps, Books and Reports Shale Gas Report- Additional Sample Pages | Page 2

Shale gas
some of the most prolific basins in
North America.
Ultimately, development of Chinese
shale gas will depend on flow rates
and reserves per well, costs and gas
prices.
Some analysts suggest that shale
plays in China will have similar, if
not better flow rates relative to US
wells, given that they are significantly
deeper. But deeper also means more
expensive to drill.
Chinese shale-gas drilling costs are
a contentious issue. Developers tend
to cherry-pick the best numbers and
the methodology behind estimates is
unclear.
Sinopec, which has a pilot project
at its Fuling Block, is spending an
estimated $10 million-13 million per
well. Flow rates are estimated to range
between 4.8 million to 8 million cf/d,
laying the foundation for commercial
production in the area.
According to data from oil-service
companies, the cost of drilling a shale
well in the Sichuan basin varies from
$8 million-11 million for a five-to-eigh t
stage horizontal well with a 1,000
metre lateral section.
However, Scott Stevens, senior vice
president of US consultancy Advanced
Resources International (ARI), says
shale-gas wells in China probably cost
on average at least $30 million.
He says that because of faulting,
developers have to drill a vertical
pilot well first to understand the
geology, which is cheaper than a
horizontal. But the true cost becomes
the horizontal plus the ver tical
well, which is even higher than his
estimate.
Nonetheless, Stevens expects
costs will fall to about $15 million
by 2018, as operators benefit from
economies of scale and experience.
This is still relatively high compared
to the US experience, however, where
it costs about $9 million to drill a
shale well.
As a rule of thumb at least 100
wells are needed to prove a shale play.
To date only about 130 wells have
been drilled in the entire Greater
Sichuan basin, which represents more
than one play.
Developers say initial drilling has
confirmed the resource potential,
but China’s shales are still far from
understood.
According to the latest repor t
released in June by the EIA, the
bulk of technically recoverable
shale-gas resources sit in the marine
and lacustrine source rocks of the
Sichuan (626 trillion cf), Tarim (216
trillion cf), Junggar (36 trillion cf)
and Songliao (16 trillion cf) basins.
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Foreign companies in China’s shale sector
ConocoPhillips

Joint study agreement with CNPC at the Neijiang-Dazu block.
Joint study agreement with Sinopec for Qijiang in southwestern Sichuan province. The US major
will carry out a 2-D seismic sweep and drill two wells.

Shell

Joint study agreement with Sinopec at Xiang E Xi Block. One exploration well, Liye-1 already
drilled. The second well, Engye-1, expected to be completed around January 2014.
The Anglo-Dutch supermajor is starting a “significant drilling season” this and next year at its
Fushun Block, as well as its tight-gas Block in Jinqiu, both in Sichuan province, to find “sweet
spots” for longer-term production scheme.
Shell and CNPC were granted China’s first foreign-invested production sharing contract (PSC)
for shale gas earlier this year at the Fushun-Yongchuan Block.
In October 2012, the joint venture reported flow rates of up to 15 million cf/d at its Yang
201-H2 well targeting the Longmaxi shale in Luzhou, Sichuan, making it the highest flowing single
shale well in China.

Eni

Joint study agreement with CNPC at the 2,000 square kms Rongchang Block in Sichuan province.
The block lies next to Shell’s Fushun block.

Total

Joint study agreement with Sinopec for a block in Anhui province. Expected to drill three wells.

ExxonMobil

Joint study agreement with Sinopec for the Wuzhishan-Meigu block covering 3,643 square kms in
southwestern Sichuan province.

Chevron

Joint study agreement at the Qiannan basin in southwestern Guizhou province. The US major,
has not identified its partner, but state media identified Sinopec. It is drilling the second and third
wells in the basin this year.

Hess

The US independent signed a study agreement with Sinopec to asses shale-gas and oil potential
in the Shengli oilfield in east China.

BP

Reported that BP and Sinopec held talks over potential cooperation at the 2,000 square kms
shale-gas block in Kaili in Huizhou province and a 1,000 square kms block in Huangqia, northern
Jiangsu province.

Dart Energy

Dart Energy signed a PSC with Henan CBM to develop shale gas in the Xiushan Block in Sichuan
province.
The contract covers 720 square kms, which was awarded as part of the first shale-gas
auction.
Dart is still waiting government approval but hopes to start drilling next year.•
Another 222 trillion cf of technically
recoverable resources exist in the
smaller, structurally more complex
Yangtze Platform, Jianghan and
Subei basins. These plays lie near
major demand centres and are still
considered prospective.
Relative to the US, the shales of the
Sichuan and Tarim basins are potentially enormous and, if successful,
could rival the Marcellus in terms of
absolute scale.
However, the Chinese plays do
have a much lower gas concentration than the Marcellus, and are
more analogous to the Barnett or

Haynesville in overall reserves concentration. Depth of shale is largely
greater in China, although similar
to the Haynesville, meaning there is
the potential for these plays to be
economic.
For now though, the focus on the
Greater Sichuan area is understandable, given the Tarim basin is much
farther away from the markets in
eastern China. Not to mention its
shales are much deeper, potentially
rendering them uneconomic. A lack of
water supplies poses a serious challenge to development of the Tarim
basin in western China too. DE•
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