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Total Plans to Drill for Shale Gas With Sinopec in China’s Anhui

Total SA (FP) plans to seek shale gas with China Petroleum & Chemical Corp. (386) by drilling in Anhui province, moving the third-largest European oil company closer to exploiting Chinese reserves that are the world’s biggest.

Total and Sinopec, as the Chinese refiner is known, will search for gas in the 4,000 square-kilometer (1,500 square mile) Xuancheng permit near Nanjing after carrying out two-dimensional seismic surveys in the five months through February, according to the Courbevoie, France-based explorer’s latest annual report.

Drilling is scheduled for this year and next. “If the results of this campaign are favorable, an agreement relating to the long-term development of these resources might subsequently be negotiated with Sinopec,” Total said in the report.

Asia’s biggest refiner has marked shale-gas development as its 2014 priority after doubling its output forecast from a key field in China’s southwest. The Fuling project in Chongqing will yield at least 10 billion cubic meters in 2017, compared with a 5 billion goal for 2015, Chairman Fu Chengyu said this week.

Shale development in China is slow and oil companies are careful about estimating the size of reserves and output, Total Chief Executive Officer Christophe de Margerie said in January.

China has set a national output target of 6.5 billion cubic meters of shale gas by 2015, and as much as 100 billion cubic meters by 2020. The goals are meager compared with U.S. output of 266 billion cubic meters in 2012, as high costs, difficult terrain and a lack of infrastructure curb development, casting doubt on whether even the lower target is capable of being met.

China is the biggest energy consumer and had a shortage of natural gas this winter as it tried to cut coal use to fight air pollution. Beijing plans to replace coal power plants with gas.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Tony Barrett, Amanda Jordan

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