PetroChina puts CBM drilling on hold

PetroChina is putting its coalbed methane (CBM) drilling on hold as complex geology and limited lifting technology have put a damper on the company’s lofty production targets, noted RBC Capital Markets analyst Peter Hutton July 8.

Plans to drill up to 2,000 production wells in the Shanxi and Shaanxi provinces are said to be under review as drilling results currently do not support production volumes earlier anticipated, noted Hutton, citing the International Oil Daily’s report that 700 of 1,000 wells already drilled have turned up dry.

In 2012, China's Ministry of Land and Resources estimated China's CBM deposits may be the third largest in the world by volume, at approximately 120.7 tcf.

Daniel Yergin, IHS vice chairman and a co-author of a report on global unconventional resources in early 2013, referenced the potential for a large resource base in China, perhaps even larger than in the US, but cautioned that production may differ greatly as "circumstances that promoted this development in the US differ in important aspects from other parts of the world."

Despite the potential of the Shouyang and Qinnan blocks in Shanxi Province and the Enhong and Laochang areas in Yunnan Province – three of China’s largest CBM fields – issues with CBM pipelines and CBM-fired power plants have, along with the complex geology of the fields and a lack of regulatory support, troubled the development of China's CBM industry for a decade.

According to Hutton, China produced 0.6bcm last year, far from the pace needed to hit its 2015 production target of 30bcm in 2015.