One of the most common tactics for entering a new play is to look for analogs to existing plays. This sort of “stick with what you know” approach has led to successful frontier exploration in places like West Africa and the Mediterranean Sea.
It does not necessarily work as well with shale plays. Even within North America, shales vary drastically from basin to basin and even within basins. Operators eyeing foreign shales will need to take a very tentative approach.
Chinese opportunities
China is trying to wean itself from coal and expects to increase its natural gas consumption by a factor of five, according to the International Energy Agency. The hope is to have natural gas account for 10% of the country’s energy mix by 2020.
To this end, Chinese national oil companies have partnered with foreign companies both in China and in North American shale plays to increase their technical understanding of these challenging and complex resources. Most recently, Devon Energy Corp. signed an agreement with Sinopec International Petroleum Exploration & Production Corp. whereby Sinopec plans to invest US $2.2 billion in exchange for one-third of Devon’s interest in five new venture plays in North America. And Shell recently announced two vertical discoveries in the Sichuan basin in China.
China claims to have shale gas resources of 3,532 Tcf, according to a report titled “Unconventional gas and the implications for the LNG market in China,” written by Chris Gascoyne and Alexis Aik for the 2011 Pacific Energy Summit. Tapping into it will not be easy – multiple sources point to equipment and labor shortages as well as supply chain challenges. Service companies are not unaware of this opportunity, however. In a recent earnings call, Halliburton CEO Dave Lesar said international unconventional resources were “highly undercapitalized” on the equipment side, and President of Strategy and Corporate Development Tim Probert added, “We’re in the process of mobilizing horsepower to our Europe/Africa/CIS, Middle East/Asia, and Latin America regions in support of these developments.”
Access
In addition to possible supply shortages, gaining access to shale acreage will be challenging. According to an article in the Financial Times, joint venture partners are the most common avenue to access the Chinese market. “Even high-profile multinationals with extensive local contacts and resources face regulatory hurdles because the energy sector is considered as a strategically sensitive industry,” the article states. “For this reason, the Chinese government typically requires local Chinese company participation and/or the use of Chinese content, conditions that it expects will help the country to develop its own shale gas expertise.”
This access difficulty may be easing, however, since the government also recently announced it considers shale gas an independent resource from conventional hydrocarbons and will allow foreign companies to participate in their development. It also will open the door to smaller Chinese energy companies.
Chinese shale development is likely to happen, but not at the speed with which it has happened in the Western Hemisphere.
Recommended Reading
Spate of New Contracts Boosts TechnipFMC's Subsea Profits
2024-04-30 - TechnipFMC's operational profits are growing as the company heightened its focus on “quality” subsea orders, which earned $2.4 billion for the first quarter.
AI Advancing Underwater, Reducing Human Risk
2024-03-25 - Experts at CERAWeek by S&P Global detail the changes AI has made in the subsea robotics space while reducing the amount of human effort and safety hazards offshore.
Going with the Flow: Universities, Operators Team on Flow Assurance Research
2024-03-05 - From Icy Waterfloods to Gas Lift Slugs, operators and researchers at Texas Tech University and the Colorado School of Mines are finding ways to optimize flow assurance, reduce costs and improve wells.
Forum Energy Signs MOU to Develop Electric ROV Thrusters
2024-03-13 - The electric thrusters for ROV systems will undergo extensive tests by Forum Energy Technologies and SAFEEN Survey & Subsea Services.
PGS Wins 3D Contract Offshore South Atlantic Margin
2024-04-08 - PGS said a Ramform Titan-class vessel is scheduled to commence mobilization in June.