Shell’s Discovery of Shale Gas in Shenzen

The energy balance of power could be on the verge of another dramatic shift following the positive drilling for shale gas in China.

The fuel - best known for its controversial extraction method using large amounts of high-pressure water, sand and chemicals, known has fracking, which objectors say causes contamination and minor earthquakes - has already created a mining boom in America, although not without opposition.

And in Lancashire, where massive reserves have been identified, the lobby against shale gas has led to demonstrations and arrests.

This week, three people were charged with obstructing or disrupting a person engaged in a lawful activity after they occupied a rig for 14 hours. Energy company Cuadrilla, which owns the rig, said it had "nothing to hide" about its operations.

In China, however, the discovery of shale gas in the Sichuan basin is likely to be given a more sympathetic reception, given the country’s enormous energy demands for its production-driven growth and expanding urban population.

The finds in China have been made by Royal Dutch Shell, and the company’s  partner, PetroChina, part  of top energy group CNPC, said they had got positive results from two wells.

"Shell has two vertical wells and they got very good primary production," Professor Yuzhang Liu, Vice president of Petrochina's Research Institute of Petroleum Exploration and Development (RIPED), told Reuters at the World Petroleum Congress in Doha. "It's good news for shale gas." 

But some experts doubt the boom in shale gas in the US could be repeated elsewhere due to difficult geology or water availability.

Liu admitted the rock formations in China were different, but that they would not hamper production.

Shale gas has transformed the US from gas shortage to being on the brink of being liquefied natural gas exporters.

Shell would not confirm the find, but said: "Shell will complete drilling activities by the year end ... as planned."

Chief Executive Peter Voser has previously said he had "great expectations" for Chinese shale, but remained cautious.

"We are going through the exploration phase there and are exactly now analysing what potential is available now in China," he told a news conference.

London-listed mining giant BHP Billiton has said it plans to invest even more heavily in shale gas production.

The company has already spent almost $17bn on two major shale gas acquisitions this year, buying Petrohawk Energy in August and Chesapeake Energy's interest in an Arkansas field in February.

Michael Yeager, head of petroleum, said BHP would spend about $4.5bn developing shale gas in the US next year.

He said it was "taking a prudent approach to address concerns relating to seismic activity".

A US Energy Information Administration report in April said China had 1,275 trillion cubic feet of technically recoverable shale gas resources - the largest in the world.

(gtglobaltrader.com)