Sinopec Ups Investment in Fuling Shale Gas Field

Sinopec expects to have ploughed a total of RMB 24 billion ($3.9 billion) of investment into the Fuling shale gas field in Chongqing by next year, as part of attempts by the state energy giant to boost production capacity at the project, a top company executive said in Beijing last week.

The figure, provided by Senior Vice President and Board Director Wang Zhigang, is nearly 12% higher than the RMB 21.5 billion estimate given by officials at the Ministry of Land and Resources (MLR) in September (see China preparing to unveil third shale gas auction, 17 September 2014). The MLR said Sinopec would spend that much to drill 253 wells from 2013 to 2015.

The drilling campaign cost more than RMB 2 billion, which works out to an average cost of nearly RMB 100 million per well – an enormous sum beyond the reach of most private companies.

A shale gas well in China needs to produce 40-60 thousand cubic metres per day (Mcm/d) to be economically viable, said Wang. Some of Sinopec’s earlier wells failed to meet this standard, such as Pengye 1, drilled in June 2012 in the Pengshui Block in Chongqing.

Pengye 1 produced an average of 15-20 Mcm/d, which did not meet the conditions for economic development, so costs had to be reduced, Wang said.

Sinopec holds shale gas mineral rights for an area of 6.54 million hectares in China, with 3.3 million hectares in the highly prospective Sichuan Basin, according to Wang. Three shale gas blocks account for 1.63 million hectares, while the remaining acreage used to be conventional oil and gas blocks that have been re-registered as shale gas blocks.

(  interfaxenergy.com Edited by Topco)