PetroChina shale gas spending rises to more than $1.6 bln

Chinese energy giant PetroChina plans to spend more than 10 billion yuan ($1.6 billion) on shale gas this year, Reuters reported over the weekend, citing sources with knowledge of the matter, as domestic competition heats up after rival Sinopec announced a commercial find.

Confronted with high drilling costs and the complexity of tapping shale gas, China has struggled to revolutionize its energy supplies. The top energy consumer wants to unlock what could be the world's largest shale gas reserves by emulating the success of the US shale boom.

PetroChina's decision to triple its shale gas spending from expenditures on the unconventional fuel over the past few years comes just months after Sinopec Corp lifted hopes that China is near a breakthrough by announcing a commercial find.

PetroChina, Asia's largest oil and gas producer, has also lifted its 2015 shale gas output target to 2.6 billion cubic meters (bcm), up from the previous 1.5 bcm, -according to a company official and a government source.

That would represent only about 2.3 percent of China's total natural gas output of around 113 bcm last year.

"PetroChina wants to play catch-up after Sinopec's success," said a government source.

Since around 2010, PetroChina has spent about 3 billion yuan on pilot shale drilling, according to both sources. The State giant, which makes up around 70 percent of China's total natural gas output, has so far largely focused on growing its conventional oil and gas portfolio.

PetroChina will focus on two zones - Weiyuan-Changning in southwest Sichuan Basin and Zhaotong in Yunnan Province.

"PetroChina has over the past four years improved understanding of the shale resources and achieved some technological breakthroughs," said Mao Zefeng, joint company secretary of PetroChina."We're stepping up shale gas development this year."

Sinopec's shale work has been concentrated in Fuling of Southwest China's Chongqing, also in the Sichuan Basin, one of the most promising geological zones for the unconventional fuel.

The main challenge for both Sinopec and PetroChina is to cut the drilling cost per well to under 50 million yuan, half the current hefty rates averaging around 80 to 100 million yuan, experts say.