China Petrochemical Targets China Shale Gas Reserves

Oil and gas giant China Petrochemical Corp's formation of two joint ventures with overseas drilling technology firms in the past month could pave the way for technology transfers that would help unlock the mainland's vast untapped shale gas resources.

Analysts said China Petrochemical's drilling services ventures with Switzerland's Weatherford International and FTS International of the United States would also boost the image of Sinopec Oilfield Service, a unit of subsidiary China Petroleum & Chemical Corp (Sinopec), which it hopes to spin off for a listing.

Neil Beveridge, a senior analyst at US brokerage Sanford Bernstein, said it was unusual for China Petrochemical, which is both a customer and a rival of its foreign partners, to enter into joint ventures with them. Sinopec is the customer, while Sinopec Oilfield is the rival.

"It is like if you are building a house, you normally just bring in the people to do the job, you don't need to form a joint venture," Beveridge said. "This may be a way for technology transfer as the parties foster closer relations."

PetroChina's parent China National Petroleum Corp, which supplies drilling services to PetroChina, has not announced any oilfield services joint ventures with overseas partners but has instead tapped foreign expertise through suppliers such as Anton and SPT.

Both Beveridge and Daiwa Securities analyst Adrian Loh said the ventures with Weatherford and FTSI would augment Sinopec Oilfield's profile and help it get a higher stock market valuation in its potential listing.

(scmp.com Edited by Topco)