China seeks next shale success story after Fuling

China’s first commercial shale gas development in the Fuling area of Chongqing will not be a one-off, according to industry experts. They expressed confidence that other shale sweet spots will soon be unearthed in southwest China.

The project – operated by state-owned Sinopec and primarily tapping the Jiaoshiba Block in the area – has been heralded as a major breakthrough in China’s shale gas development.

While Fuling has offered hope for a troubled industry, it remains China’s only large find so far and Chinese companies have yet to replicate its success elsewhere in the country.

"Jiaoshiba is not the best spot in the… Sichuan Basin. We believe there are areas in the south of the basin that will achieve the same level of performance in production, and they will be bigger," said Li Yuxi, a researcher with the Mineral Resources and Reserves Evaluation Centre of the Ministry of Land and Resources, at the China International Shale Gas Summit in Beijing.

Li told Interfax other blocks in the basin with high potential are Changning, Yibin, Weiyuan and Fushun-Yongchuan – which are all being developed by China National Petroleum Corp. (CNPC). "The wells to be fracked there by CNPC are expected to have good results – just wait until the first half of next year and you will see," said Li.

Statements by Sinopec officials indicate the company is not dwelling on the success at Fuling either. The NOC is exploring another block near Fuling, Li Changhe, senior engineer with Sinopec’s Oil Exploration and Development Institute, told Interfax in July (see Sinopec’s Fuling shale gas reserves get official approval, 18 July 2014). He declined to name the block.

Yang Kun, vice general manager of China Huadian Clean Energy, agreed Changning and Fushun-Yongchuan are highly prospective areas of development. He forecast that the official shale gas output goal of 6.5 billion cubic metres next year will be met entirely by production from the Sichuan Basin.

CNPC is developing Fushun-Yongchuan with Shell under a production-sharing contract signed in March 2012 and approved by the government a year later.

Shell has pledged in recent years to invest at least $1 billion per year in Chinese shale, but that commitment looks to be in doubt after Chief Financial Officer Simon Henry said last month that "progress has been slower and more difficult than we might have hoped" (see CNPC’s shale gas projects reeling from graft probe, 12 September 2014).

Days after making the comments, Henry met CNPC Deputy General Manager Wang Dongjin in Beijing.

A Shell representative in China previously told Interfax the company has completed most of the drilling work in Sichuan, and drilling of additional wells would continue into 2015. "We are evaluating the results and should know more towards the end of 2014 or Q1 2015 when we’ll decide how to move forward with each of the projects," the representative said.

Fuling forges ahead

Spanning 730,000 hectares, Fuling has produced 800 million cubic metres of gas (MMcm) so far, said Shi Yuanhui, technical director of well logging under Sinopec’s wholly owned subsidiary Jianghan Petroleum Administration, at the Beijing conference. The block’s daily output has now hit 3.8 MMcm, Shi added.

Sinopec is building a 141.3 km pipeline from Fuling to the city of Qianjiang in Hubei province with transmission capacity of 6 bcm/y. The route will then link to the Sichuan-Shanghai pipeline, pumping shale gas to cities downstream of the Yangtze River.

Sinopec has set a production capacity target at Fuling of 5 bcm/y by the end of 2015, and Shi estimated the project would recover its costs within six years. Production capacity is expected to be 10 bcm/y by 2017.

The company is partly building up Fuling to make it a major source for the Sichuan-Shanghai pipeline, the 12 bcm/y capacity of which has been underused as a result of issues at the Puguang sour gas field.

Fuling had 44 shale gas wells in production or being trialled at the end of September, according to a Xinhua news agency report on Wednesday that cited Xue Chengjin, an official with Sinopec Oilfield Service. Output has averaged 330 thousand cubic metres per day (Mcm/d) with a peak of 540 Mcm/d, according to Xue.

Sinopec is developing 135 wells at Fuling, 108 of which have been drilled and 66 hydraulically fractured. Last year, it started drilling 29 shale gas wells, finished drilling another 24 and put 13 into production.