Shell's Shale Venture in China May Be Equal to U.S. Developments

Royal Dutch Shell Plc (RDSA)'s joint venture shale gas developments in China may contain resources on a par with similar developments in the U.S.

"The geology is akin to what we have experienced in the U.S.," Matthias Bichsel, the company's global director of projects and technology, said in an interview in Abu Dhabi yesterday. "In the U.S. we have lots of variability and that variability is what we need to explore."

Energy companies are tapping shale gas trapped deep below layers of rock under the earth's surface to develop new sources of the fuel used in power plants and petrochemicals facilities. Growing output of the fuel in the U.S., where Shell produces at several areas, may spur use of the fuel for transportation.

Shell, set to produce more natural gas than crude oil this year and already the world's largest supplier of liquefied natural gas, is in the early stages of exploration and appraisal of the deposits in China and doesn't yet have an estimate of the production potential from the fields, Bichsel said. The company has shale gas agreements with all three main Chinese oil companies, Chief Executive Officer Peter Voser said at a conference in Tianjin, China, Sept. 11.

In the Middle East Shell is developing sour, or high-sulfur, gas in Saudi Arabia's Rub al Khali desert, also known as the Empty Quarter, and would be interested in developing similar resources in the United Arab Emirates, Bichsel said.

Shell intends producing enough gas at each of the projects to make them commercially viable, Bichsel said, without specifying their potential output.

Bichsel said the company was the largest LNG supplier with sales of 22 million metric tons a year. The company has projects under development to bring another 7 million tons of annual capacity into operation and another 20 million tons a year of plans under study.