Foreign Oil Giants Seek Shale Gas Opportunities in China

EXCHANGE and COOPERATIONForeign Oil Giants Seek ShaleGas Opportunities in ChinaBaker Hughes ready for Chinas shale gas Hughes has already made a start in the shale gas marketdevelopmentand has been doing the heavy lifting for global oil giantsBaker Hughes, one of the largest oil field service including the Royal Dutch Shell Plc. The US companyproviders in the world, lays the groundwork in China's has seen its revenue double to USS19. 8 billion in 2011shale gas sector though the country's shale gas industry is compared with USS10. 4 billion in 2007still in its early days. However, it has not deterred foreign According to Crouch, the development of shale gas inoilfield companies from trying to get into the market with North America and the integration of some other businessimmense potentialunits,which enables the company to service the entireAfter spending nearly 20 years of his working career life cycle of the well, are the major growth drivers forin the oil industry, Crouch, the vice-president of the Baker Hughes. The company's business in North AmericaHouston, Texas-based oilfield company Baker Hughes, accounted for nearly 52 percent of its total revenue inbelieves that despite its complexity, shale gas does 2011.""In China, shale gas seems to be developing a lotopen up new possibilities for global oilfield equipment more slowly than in the other markets. But there has alsocompanies in China. Crouch's assessment of the industry been an increase in the number of appraisal wells beingcould not be far off the mark considering that in April this dug. This will help us to know more about the reserves,year, a month after China announced its shale gas goals, and the capabilities and technologies needed to extract thehe was appointed managing director of Baker Hughes for resources, "he says. China's market is one of the fastestNorth Asia, with special emphasis on shale gas projects in growing markets for Baker Hughes, though its revenueChinain China ranks around 15th among the company's 23China has set a target of producing 6.5 billion cubic regionsmeters a year of shale gas by 2015 from virtually none The conventional energy market still accounts forthis year and hopes to produce between 60 billion and 100 most of Baker Hughes'business in China, Crouch says,billion cubic meters a year by 2020. Crouch says that the without revealing any revenue numbers. Baker Hughesimportant thing for oilfield companies like Baker Hughes is also bullish on the South China Sea and other deepis to lay the proper groundwork for a strong futureater projects. " There has also been a strong growth inUnlike conventional energy resources, shale gas our unconventional resources business, such as shale gasinvolves complex extraction procedures, equipment and he says. China has drilled 63 appraisal wells for shaletechnology before it can be successfully commercialized. gas till the end of April this year. Baker Hughes, alonShale gas is natural gas that is trapped inside shale with Chinas State-owned oil giants Sinopec Group androck and is extracted by using highly pressurized water PetroChina, is associated with a dozen of these wellsmixed with chemicals to crack open the rock. China does Crouch says that Baker Hughes rich legacy in Northnot have any commercial production of shale gas, but American shale gas development will helD it have anexploratory drilling for shale has increased greatly in the edge over competit中国煤化工companypast year. Global oilfield majors like Baker Hughes are does have some hiCNMHGperfectlyexpected to be key players that can provide a wide range suited for China, it will be wrong to assume that theof operational services for shale-gas developers. Baker US and Chinese markets are the same, he says. In someCHINA OIL&GAS 59places of China where there are shale gas deposits, there Chinese market, " Crouch saysis not enough water or adequate transportation networksthereby making commercial extraction difficult From a Shell to make huge investment in China shalegeological perspective, the shale gas reserves in China are gasmore complex from those found in the US, he says. " It's Royal Dutch Shell plans to spend at least USSI billiondifferent and there's going to be a learning curve here in a year exploiting China's potentially vast resources ofthe early stages of development, which will impede rapid shale gas, according to the firm's top China executivegrowth in the short term. So laying the groundwork for who described this move as part of an aggressive strategythe future is extremely important.to expand in the world's biggest energy market. ShellIt was reported earlier this year that Chinas petroleum in March secured China's first product sharing contractgiant Sinopec is consolidating all its service companies for shale gas, hoping that getting in early will allow it toand looking to spin off its oilfield engineering services be a big beneficiary from the sort of boom in shale thatbusiness as a new company. But Crouch also knows has trans formed the US energy market. Asked if the firmthat competition from other global companies is also remained committed to a plan to invest US SI billionincreasing Houston-based Schlumberger, a leading oilfield a year in China's shale gas over the coming few years.services company in the world, recently acquired a 20 Lim Haw Kuang, Shell's top China executive, said in apercent stake in Hong Kong-listed Anton Oilfield Service recent interview with news media: "If there has been anGroup in July. Luo Lin, chairman of Anton, a private adjustment to that pledge, it could only be an upwardChinese company, has confirmed that shale gas will be revision, "a Malaysian national and a Shell veteran of 34the main focus of its cooperation with Schlumberger. "It yearsis clear that the shale gas market in China is a developing Shell has lined up CNPC, the country's top energyand dynamic market. My top priority is to make sure that group and parent of Petro China, as its partner for boththe strategies we have in place will help us deliver to the shale gas and the Taizhou refinery project. "It's an alliance(to page 62)罐装页岩气出站中国煤化工Well Ning 201-HI of"Changning-Weiyuan National Shale Gas DemonstrationHiCNMH Gell in Changningarea. It was started on June 17, 2011, and now has the highest production with Chinese independent development月方数摇2026EXCHANGE and COOPERATIONavailability of assets globally, "said Simon Powell, oil and Generally speaking, the Chinese national oilgas analyst at CLSA Ltd in Hong Kong.companies' substantial investments and pursuit of serviceThe three energy companies may be very passive in contracts and loans to resource-rich countries havethe waiting process for the intended acquisitions to be contributed and will continue to contribute to globalrealized because of rising investor protectionism among upstream investment and global oil supply. For instance,the US and European countries, " Kingston Securities Chinas national oil companies are working together withResearch Director Dickie Wong said in Hong Kong. international oil companies and national oil companiesChina's State oil companies have spent more than USS100 from other countries to increase crude production in Iraqbillion on assets over the past decade to supply the world's Their investments are also contributing to development oflargest energy importer.oil and gas fields in Russia, Central Asia, Latin AmericaAccording to IEA data, successful acquisitions allowed and AfricaChina's national oil companies to expand their overseas Chinas total outward direct investment rose 8.5equity shares from 1. I mb/d in 2009 to 1.36 mb/d in the percent year-on-year to USS74.65 billion, which makesfirst quarter of 2010. In comparison, China's domestic the country the sixth largest investing nation in termsproduction in 2009 was 4.0 mb/d Chinese oil companies of worldwide value. The latest Statistical Bulletin ofare now operating in 31 countries and have equity China's Outbound Foreign Direct Investment, which wasproduction in 20 of these countries, though their equity published in August, showed that Chinese non-financialshares are mostly located in four countries: Kazakhstan, ODI surged by 14 percent in 2011 from a year earlier toSudan, Venezuela and AngolaUSS68.58 billion(from page 60)between strong firms. That should help control the cost, The company may face a bigger test investing insaid Lim, referring to its shale gas venture with CNPC in China's refining sector where there are question marksSichuan Province, where Shell drilled Il wells last year, over profitability due to rigid state controls, whilemore than any other international firm. Shell hopes to environmental issues have also become more importantleverage its operational and technology expertise gained Environmental concerns forced the relocation a few yearsdeveloping shale gas in North America, while CNPC ago of a Kuwaiti-invested plant, while recent protestsholds the country's premium oil and gas acreagein China over pollution have turned violent and forcedShell is a major supplier of liquefied natural gas to authorities to cancel projects. Shell, which hopes toChina, securing gas from its global fields including in complete a feasibility study on its Taizhou project in theAustralia and Qatar. LNG is super chilled gas for shipping next few months, said it had been communicating aboutin tankers. The company also plans to relocate its global the project from early on with its partner CNPC, localbusiness unit for coal bed methane to China later this year, government and residents in a bid to allay safety andand establish a global research hub for unconventional gas environmental worriesand oil- its first outside HoustonChina is estimated to hold the worlds largest reservesLim who has been Shell China executive chairman of the unconventional gas-which can be unlockedince 2005, said successfully investing in China required from ancient shale rocks by"hydraulic fracturing",afinding a long-term strategic partner. " We need to find a technology well developed in recent years in Northpartner who will not only cooperate with us well for one America. Shell is also aiming to build a USS12. 6 billionday or two, but also share the same development vision refinery and petrochemical complex in eastern China,and direction over the next few decades, he said Shell a project that could become the single largest foreignhas lined up alliances with Chinese oil firms outside investment in China. The Anglo-Dutch firm is one of theChina, covering coal-seam gas in Australia, LNG in biggest investors in China's energy sector but faces strongCanada, gas exploration in Qatar and drilling offshore competition. Exxon Mobil, BP, Total and Chevron CorpWest Africa. Shell has taken a different approach in are also tryingChina's fuel retailing, by aligning with regional players where use of!中国煤化工Chinese marketthis decade andindependent of the big two local oil firms Petro China and growth in oilCNMH Gan a third of theSinopec Corpworld total数据o