WoodMac: PetroChina and Sinopec Differing in Focus on Shale Gas
In a presentation at Gastech 2014 in South Korea, Wood Mackenzie appraised recent activity in China’s shale gas sector, highlighting the different strategies of two Chinese National Oil Companies (NOCs), PetroChina and Sinopec.
Robust gas demand continues to attract investment in the country’s upstream sector but divided priorities may further delay progress in domestic unconventional gas projects.
Craig McMahon, Head of Asia Upstream research for Wood Mackenzie, says, “While much ‘hype’ surrounds China’s shale sector, on the ground investment is focused elsewhere. PetroChina – comfortably the largest shale gas acreage holder – devoted just one percent of its overall 2013 budget to shale gas. Conventional and tight gas opportunities are top of its priority list, and considering its recent performance it’s hard to argue with that strategy.”
McMahon pointed to impressive growth in tight gas production and PetroChina’s recently announced 10 trillion cubic feet (tcf) conventional gas find, Anyue, as vindication of its approach.
But Wood Mackenzie said the shale gas story is not only about PetroChina; “Sinopec’s acreage position may be smaller, but it is now setting the pace in the Sichuan Basin. The Fuling discovery will be the first commercial shale development in China,” McMahon added. The company is now set to ramp up drilling and investment on the asset and could be producing material volumes as early as 2015.
“It is interesting to note the different strategies of China’s two major NOCs on domestic shale,” remarked McMahon. “International Oil Companies (IOCs) are making less progress, as they struggle with an investment climate that does little to support their strategic goals. But with PetroChina’s attention elsewhere, might they be better utilising IOC expertise and capital to unlock China’s vast shale resource?”
The presentation concluded that while IOCs involvement in China’s shale gas sector to date is small compared with Chinese NOCs, with the Government intent on stimulating private investment across the country and a growing dependence on energy imports, that situation could be set to change.
Press Release, March 26, 2014; Image: PetroChina