Sinopec Targets Shale-Gas Output Of 2 Billion Cubic Meters By 2015

China Petrochemical Corp.(SNP), or Sinopec Group, plans to produce at least 2 billion cubic meters of shale gas annually by the end of 2015--around one-third of the country's targeted production of 6.5 billion cubic meters for that date, the official China Daily reported Wednesday.

The company will invest more than CNY1 billion in the shale-gas and oil sectors this year, up from about CNY600 million in 2011, the newspaper said, citing Bao Shujing, deputy manager of the Unconventional Energy Technology Support Department at Sinopec's Petroleum Exploration and Development Research Institute.

On Sunday, French oil giant Total S.A. (TOT) said it had reached a preliminary agreement with Sinopec to search for and develop shale gas.

Sinopec said it has finished drilling three shale-gas wells and is drilling another seven, including some in the Nanchuan block for which it won exploration rights in China's first shale-gas auction last July, the newspaper said.

Sinopec owns three shale-gas blocks covering 17,000 square kilometers.

The National Energy Administration has targeted national annual shale-gas output of 6.5 billion cubic meters by 2015 and 60 billion-100 billion cubic meters by 2020.

China has shale-gas resources of 134 trillion cubic meters, of which 25 trillion cubic meters are recoverable, Ministry of Land and Resources data showed.

Most of Sinopec's technology is imported and foreign partners are supporting the company's exploration and drilling, China Daily said, citing an unidentified person from Sinopec.

Sinopec completed joint environmental research on shale gas exploration with Exxon Mobil Corp. (XOM) in the Meigu block in Sichuan province last year, the newspaper said, without elaborating.

Sinopec is also conducting a risk assessment with BP PLC (BP) at Guizhou's Kaili deposit and with Chevron Corp. (CVX) at Guizhou's Longli field.

Earlier Wednesday, Royal Dutch Shell PLC (RDSA) and Sinopec's chief competitor, China National Petroleum Corp., signed a shale-gas production-sharing contract for 3,500 square kilometers in the Fushun-Yongchuan block in the Sichuan Basin.

So far, about 50 shale-gas wells have been drilled in China, but no commercial production has been announced, the newspaper said.