Shell Signs First Chinese Shale Gas Production Deal With CNPC

Royal Dutch Shell Plc (RDSA) signed China’s first shale-gas production sharing contract as the world’s second-largest economy seeks to unlock resources similar to those that sparked the U.S. natural gas boom.

Shell and China National Petroleum Corp (CNPZ)., the state- controlled parent of PetroChina Co. (857), agreed to explore, develop and produce shale gas in the Fushun-Yongchuan block in the Sichuan basin, an area covering about 3,500 square kilometers (1,350 square miles), London-based Shell said in a statement on its website yesterday.

Hydraulic fracturing, the technology behind shale gas that breaks open underground rocks, allowed the U.S. to become the world’s biggest gas producer. China may have 50 percent more shale gas reserves than the U.S., according the U.S. Energy Information Administration.

“We are delighted about this new milestone in our strategic cooperation with CNPC,” Shell Chief Executive Officer Peter Voser said in a statement. “China has huge shale gas potential and we are committed to making a contribution in bringing that potential into reality.”

Shell Chief Financial Officer Simon Henry said last month that the company invested more than $400 million in shale projects with CNPC in China last year and that they plan to drill as many as 25 wells this year.

Chinese shale may hold 1,275 trillion cubic feet of technically recoverable gas, or 12 times the country’s conventional natural-gas deposits, according to a U.S. Energy Information Administration report published in April. China’s “technically recoverable” reserves are almost 50 percent more than the 862 trillion cubic feet held by the U.S., the EIA said.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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