Royal Dutch Shell signed a production sharing pact with China National Petroleum Corporation (CNPC) to develop a shale gas block in China, the first deal of its kind in the country.
China is in the very early stages of tapping its potentially large shale gas resources and the government wants to identify the right technology to unlock them in the next few years, aiming for a leap in shale production by 2020.
“China has huge shale gas potential and we are committed to making a contribution in bringing that potential into reality,” Shell Chief Executive Peter Voser.
China’s top energy agency, the National Energy Administration (NEA) officially unveiled on Friday a target to produce 6.5 billion cubic meters (bcm) of shale gas by 2015, or roughly 6 percent of China’s current total gas production.
It intends to dramatically boost output to 60-100 bcm in 2020, a level some experts say is over-ambitious as it faces technological, environmental and regulatory roadblocks.
Zhang Yuqing, head of NEA’s Oil and Gas Department, said foreign firms can enter product sharing contracts with Chinese firms or provide engineering services.
Shell has already conducted some exploration work on the Fushun-Yongchuan block covering 3,500 square kilometers in the southwestern province of Sichuan.
China is likely to tender its second batch of shale gas blocks in April or May after awarding two out of four blocks in its first auction in July last year, said Xiong Bingqi, an official with the Ministry of Land and Resources.
China started the shale push in late 2009, inspired by a shale boom in the United States. Its state energy firms have since then entered multi-billion-dollar U.S. shale deals with Chesapeake Energy and Devon Energy Corp.