Capex increases among China’s NOCs to boost shale development

Shale gas development in China is expected to benefit from an overall boost in capital expenditure by state-run PetroChina and Sinopec this year.

The boost coincides with an announcement by China’s supreme authority, the State Council, on May 21 that it will open up the country’s gas industry, both upstream and downstream, to non-state investors. 

PetroChina, which is the listed arm of China National Petroleum Corp. (CNPC), was reported by business website Sinocast as saying on May 19 that it had formed a second shale gas joint venture in Sichuan Province.

The joint venture will have an investment budget of US$435 million for the development of a shale block in the Chendu area, northwest of Sinopec’s productive Fuling block in the Chongqing region adjacent to Sichuan, Sinocast said.

PetroChina’s partners include both state-owned and private enterprises, including Sichuan Energy Investment, China Huadian Clean Energy, Beijing Gas, Neijiang Investment Holding and Zigong State Asset Energy Investment.

No further details of the Chendu project were provided.

Reforms to both the oil and gas industries must include “better efficiency and competitiveness by giving the market a decisive role”, state news agency Xinhua reported on May 21, quoting a State Council statement. 
Non-state engineering companies will also be encouraged to participate in upstream activities, it said.

Meanwhile, Sinopec – the other NOC engaged in Chinese shale gas development – is including the development of the second phase of its Fuling project in its spending plans for this year, Interfax China reported.
Fuling is China’s biggest shale gas production block. 

PetroChina is producing shale gas from its Changning-Weiyuan block in Sichuan and earlier this month achieved a test flow of 1.15 mcm per day from its Zhaotong development in southwest Yunnan Province, Interfax reported.

Sinopec and PetroChina – along with the third NOC, China National Offshore Oil Corp. (CNOOC) – have previously said they will increase their 2017 capex after several years of spending reductions.

The National Energy Administration (NEA) has set a domestic shale gas production target of 30 bcm per year by 2020.