ConocoPhillips halts Sichuan shale gas talks with PetroChina

ConocoPhillips ended talks with PetroChina Co. on a shale gas development in the country after a two-year study.

“The right commercial decision was to halt further discussions on this block,” ConocoPhillips’s China unit said in an emailed response to questions Wednesday. The company said it made the decision last year.

While China has sought to replicate the U.S. shale boom, the nation last year cut its 2020 shale gas production target to about a third of its original estimate amid difficult geology, lack of infrastructure and limited exploration rights. The nation holds the world’s largest shale gas reserves.

“In this low oil price environment, it’s not surprising that foreign oil majors are cutting spending on non-core businesses,” Li Li, a research and strategy director at ICIS China, a Shanghai-based energy consultant, said by phone from Guangzhou. “Given the complicated shale formations in China, only the state-owned Chinese energy firms are more likely to pursue their investment in the sector as they see it more as a national strategy.”

State-owned China Petroleum & Chemical Corp., known as Sinopec, operates the nation’s largest shale-producing project in southwestern China’s Fuling. Its biggest rival and PetroChina’s parent China National Petroleum Corp. is also producing shale gas from its own reserves. Two calls to the office number of a Beijing-based spokesman for PetroChina went unanswered.

The halt to the talks was reported earlier by the National Business Daily. ConocoPhillips signed an agreement with PetroChina to evaluate shale potential in Neijiang-Dazu field in the Sichuan basin in February 2013.

Royal Dutch Shell Plc, which has a production-sharing contract with PetroChina in Sichuan, said it’s evaluating drilling results.

“The ongoing evaluation shows mixed results,” Shell China spokeswoman Li Lusha said in an emailed response to questions. “We continue to evaluate and should know more in the coming months when we decide how to move forward with each of the projects.”