Sinopec has lofty plans in shale gas

China Petrochemical Corp, Asia's biggest refiner, plans to increase its shale gas output to at least 2 billion cubic meters a year by the end of 2015, which would account for about one-third of the country's targeted production by then.

The company, also known as Sinopec Group, will invest more than 1 billion yuan ($158 million) in the shale gas and oil sector this year, compared with about 600 million yuan in 2011, said Bao Shujing, deputy manager of the Unconventional Energy Technology Support Department of Sinopec's Petroleum Exploration and Development Research Institute.

Sinopec won the rights during China's first shale-gas auction last July to explore the Nanchuan block, which spans Guizhou province and Chongqing municipality.

It has finished drilling three shale-gas wells so far and is drilling another seven, including some in the Nanchuan block.

"It's impossible for the company to achieve large-scale production of unconventional energy this year ... we hope to establish the capacity to produce about 500 million to 1 billion cubic meters as early as 2014," Bao said.

Sinopec owns three shale-gas blocks that cover 17,000 square kilometers, in addition to blocks overlapping with its oil and conventional gas blocks.

China, which depends heavily on imported oil to support its economic expansion, aims to tap into the shale-gas sector to achieve its goals in energy security and carbon emissions curbs.

The National Energy Administration aims for annual shale gas output of 6.5 billion cu m by 2015.

The administration has said the 12th Five-Year Plan (2011-15) will lay the foundations of large-scale production during the subsequent plan, when it aims for production of 100 billion cu m a year.

Ministry of Land and Resources data show that China has shale-gas resources of 134 trillion cu m, of which 25 trillion cu m are recoverable, meaning that the country has surpassed the United States as the owner of the world's biggest reserves of the unconventional gas.

Survey and evaluation activity related to China's shale-gas reserves, which is still at the preliminary stage, is a key issue before China goes to commercial production, said Pan Jiping, a senior researcher at the ministry.

Pan added that further technological breakthroughs and industry support policies are needed to draw companies into the sector and propel its growth.

A Sinopec source who spoke on condition of anonymity said that most of the company's current technology is imported and that foreign partners are providing support for exploration and drilling.

Sinopec completed its joint environmental research with Exxon Mobil Corp in the Meigu block in Sichuan province last year.

At present, the company is working with BP Plc in Guizhou's Kaili deposit and Chevron Corp in Guizhou's Longli field to carry out risk assessments.

Sinopec's competitor, China National Petroleum Corp, said it discovered shale gas at the Fushun block in Sichuan through cooperation with Royal Dutch Shell Plc.

So far, about 50 shale-gas wells have been drilled in China, but no commercial production has been announced.

The ministry said earlier this month that it will open the second or third shale-gas tenders this year, though it didn't provide any timetables.