China Eyes Massive Production From First Shale Project

China’s Sinopec is planning to develop a production capacity of 10 billion cubic meters per year by 2017 at the Fuling shale gas field, making it the country’s first commercial shale gas project.

Sinopec (the state-run China Petroleum and Chemical Corp.) has spent some $322 million on the Fuling project in China’s southwest, with the first breakthrough commercial discovery hit last year, and production capacity on track for significant yearly increases that could lead to fast-tracked large-scale development.

Capacity is currently at 0.6 bcm/year, but with 21 demonstration wells drilled, Sinopec plans to reach 1.8 bcm/year by the end of 2014 and 5 bcm/year by 2015.

The average daily output from each well is at least 170,000 cu m, with one well, Jiaoye 1HF, averaging over 300,000 cu m/day of production over the past year and a half.

The Fuling field is said to have reserves of 2.1 trillion cubic meters of natural gas located at depths of less than 4,500 meters. But while the quality of the shale is said to be comparable to major US plays, China has had difficulty developing its reserves due in part to a lack of technologyand water scarcity for hydraulic fracking.

According to the US Energy Information Administration (EIA) in just two basins alone—Sichuan and Tarim—there are some 1,275 trillion cubic feet (36 trillion cubic meters) of recoverable shale gas.

After state-run Sinopec, Royal Dutch Shell is the second major player on the Chinese shale scene, partnering with China National Petroleum Corp. in Changbei, Shaanxi province, to produce tight gas, and drilling in the Sichuan Basin.

In total, China has drilled fewer than 100 shale gas wells in the country—a far cry from the US shale portfolio of some 40,000 wells.

By 2020, China hopes to be producing 60-100 billion cubic meters of natural gas per year, for which the drilling pace will have to be picked up exponentially.