China's CNPC Says Italian ENI Interested in Sichuan Shale Gas Block

Italian company ENI has sent representatives to evaluate a shale gas block onshore China, state-owned China National Petroleum Corp said Tuesday.

ENI sent a team to inspect and evaluate the Shunan area within the Xinan oil and gas block in central Sichuan province for shale potential last week, CNPC said in a report on its website, adding that both companies could potentially team up to evaluate and profile the acreage.

The delegation also conducted field visits to survey the terrain, external environment and water supply conditions surrounding the block, CNPC said.

ENI and CNPC signed a memorandum of understanding to promote joint projects in conventional and non conventional hydrocarbon plays in China and outside China in January 2011. ENI has said both agreements relate specifically to shale gas business opportunities.

CNPC and Sinopec are also working with other Western majors Chevron, Shell and ExxonMobil for the evaluation of other gas blocks in China. These were negotiated directly with the companies under joint assessment agreements.

The ministry of land and resources launched China's second shale gas bid round on May 17, opening up bids to domestic state-owned and private companies. The results have not been made public.

The inaugural round was held in June 2011, with two out of four blocks awarded to local companies -- one to state-owned Sinopec and another to a Henan-based company.

In March, the ministry and other government agencies released China's official shale gas development program under the current five-year economic plan running from 2011-15, targeting commercial output of 6.5 Bcm/year (229,450 Mcf/day) by the end of 2015.

Given the lack of midstream infrastructure such as pipelines, little clarity on fiscal terms, and lengthy approvals process for development plans, analysts have called this goal too ambitious.