The ongoing battle to increase China’s production levels to meet the country’s soaring energy demand means ensuring a steady stream of conventional field developments coming onstream while also opening up alternative resources.

US contractor DMAR Engineering recently landed a FEED contract from state-owned China National Offshore Oil Corp. (CNOOC) for development options on the Liuhua 11-1 and Liuhua 16-2 oil fields offshore China.

CNOOC’s research institute is currently studying the best development options for the fields in the eastern South China Sea, which lie in water depths of 340 m (997 ft) and 404 m (1,326 ft). A tension-leg platform (TLP) with full drilling capacity is being evaluated as one possible development solution, with a semisubmersible production platform as the other realistic option.

CNOOC will decide by mid-2013 which development option to push ahead with. The operator said that the TLP would be the country’s first deepwater floating production platform and first dry tree production platform. It also would be the first TLP to be made in China.

Beibu Gulf field flows

CNOOC also recently started production from its Beibu Gulf project in the South China Sea.

The installation, hookup, and commissioning of offshore facilities for the project had been completed and first output achieved from the A5H and A2 development wells on the WZ-6-12 wellhead platform, reported partner Roc Oil. The project will run on a trial production period until the next batch of three production wells is completed and brought online within the next few weeks.

Roc reported operations at the WZ-6-12 platform would be constrained “for a number of weeks” while drilling and commissioning work was finalized.

The partners will use the jackup drilling rig HYSY-931 to drill three additional development wells, while the successful A6 and A7 wells drilled late last year also will be equipped for production.

Following the completion of drilling at WZ-6-12, the drilling rig will be moved to the WZ-12-8 West wellhead platform to carry out the final phase of development drilling for the Beibu Gulf project in 3Q 2013.

The Beibu Gulf development plan incorporates two remote wellhead platforms and one joint processing platform, which will be connected by bridge to the CNOOC WZ-12-1A platform complex and will use existing water injection and gas processing facilities.

CNOOC operates the Beibu Gulf project with a 51% stake, while Roc has a 19.6% interest, Horizon Oil holds a 26.95% interest, and Oil Australia has a 2.45% interest.

Ordos basin reserve boost

China’s national energy chiefs have been strongly backing ways of boosting the country’s natural gas production, which currently accounts for just 4% of the country’s total energy mix (oil is currently estimated at 70%). The government wants to double the gas share by 2015.

As China looks to increase its existing gas reserves for future development, it is efforts by companies such as Australia’s Sino Gas & Energy that will be typical. Sino has achieved a major increase in proven and probable reserves at its two production-sharing contracts (PSCs) in the onshore Ordos basin.

The company said independent assessor RISC Operations determined that estimated proven and probable reserves in the PSCs had increased by a factor of nearly 15 from a January 2012 assessment of 22 Bcf to 327 Bcf. Sino’s share of the reserves is 93 Bcf. Total unrisked mid-case reserves and resources have been estimated at 5.7 Tcf, which represents a 56% increase.

The assessment was based on 12 wells drilled last year, 70 km (43 miles) of seismic data from an infill drilling area in the northeastern corner of Linxing East, and 100 km (62 miles) of data from a previously unexplored portion to the southwest of the block, in addition to 100 km of north/south running seismic at Sanjiaobei. “Our intention is to progress development, as the economics of the domestic natural gas market in China continue to suggest attractive returns, while existing pipeline infrastructure, which traverses our PSCs, presents low-cost access to market,” Robert Bearden, Sino managing director, said.

Shale gas potential

China also has the world’s largest estimated shale gas reserves but is currently way behind compared to the huge success being enjoyed in the US.

The US Energy Information Administration estimated China has 1,275 Tcf of technically recoverable shale gas reserves – more than Canada and the US combined.

In a bid to kick-start its own shale boom, China has been offering acreage in recent months, with the country’s Ministry of Land and Resources (MLR) handing out exploration rights for 19 shale gas blocks to 16 companies in January. The licensing round received 152 bids from 83 companies, indicating the strong level of interest in its shale potential. The MLR expects the winners to invest US $2.06 billion into developing the shale blocks, most of which lie in south-central and southwest China.

Shell gets Sichuan basin nod

Shell has been a keen player in China for many years, spending around $1 billion per year and working with state-owned partner China National Petroleum Corp. (CNPC) in the Sichuan and Shaanxi provinces.

Recently Shell was given the green light to start work with CNPC on the Fushun-Yongchuan Block shale gas PSC in the Sichuan basin. The companies have not disclosed details of the contract, but the approval suggests that Beijing has developed the regulatory framework needed to attract more international investment that will help to develop its fledgling shale sector.

Shell CEO Peter Voser said his company is gearing up for what he described as a “significant drilling season in 2013 and 2014.” Voser added that Shell and CNPC are continuing to explore which drilling locations are best suited for long-term development and production and said the company is committed to helping Beijing achieve its shale gas production targets.

China has set a target of producing some 229.5 Bcf a year of shale gas by 2015 and as much as 3.53 Tcf a year by 2020, up from virtually zero in 2012.

Greka’s Chinese CBM well

Coalbed methane (CBM) activity is another area being pursued by China as it seeks to widen its range of resource supplies. UK-based Greka Drilling, for example, recently completed its first exploration well for CNPC at a CBM play in the Qinshui basin in the onshore Shanxi province.

Greka’s CEO Randeep Grewal said the contractor was in talks regarding further drilling work with CNPC after this probe. The low level of CBM drilling to date in China means there is potential for more work for the company in the coming months and years.

“The sheer size of the block, drilled to date only by traditional oil drilling rigs capable of drilling vertical wells that are later fraced, illustrates the vast opportunity that these third-party contracts represent for Greka Drilling’s business,” he said.

As well as being its first probe with CNPC, the well also was the first exploration probe for the company.

Greka also has been conducting production drilling for its demerged affiliate explorer, Green Dragon Gas, and has a 100-well deal with Sinopec.