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Sinopec's Fuling shale gas project to hit 10 Bcm/year by end 2017

Highlights

China Petroleum and Chemical Corp, Sinopec, said Monday it expects its Fuling shale gas project in Chongqing, central China, to reach production capacity of 10 billion cubic meters/year during 2017, up from 600 million cu m/year currently.

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It is China's largest shale gas project to date and the only one which has achieved production on a commercial scale.

The 2017 target will be achieved by developing 341.3 Bcm of shale gas resources in two phases over the next few years, Sinopec said.

"This marks an important strategic breakthrough in China's shale gas development and signifies the country's earlier-than-expected entry into large-scale commercial development phase," the company said in a statement.


It said Fuling has total reserves of 2.1 trillion cubic meters. By the end of this year, production capacity will reach 1.8 Bcm/year.

Sinopec had earlier said it expects output from Fuling to hit 5 billion cu m/year by the end of 2015.

The progress from this one project alone means China will likely hit the government's official target of 6.5 Bcm/year of shale gas production by the end of its 12th Five Year Plan in 2015. China's total shale gas production last year was 200 million cu m, according to the Ministry of Land and Resources in January.

"I think China can hit the 2015 target, as our own projections [for Fuling] are more conservative," Sinopec chairman Fu Chengyu said Monday at a press briefing in Hong Kong to discuss the company's 2013 financial results.

He said development of Fuling is one of the two largest priorities for the company this year, the other being the partial divestment of its oil marketing and distribution segment to private and social investment.

Sinopec has spent some Yuan 2 billion ($322 million) on the Fuling project and last year made a breakthrough when it found sizeable reserves that could be developed, Fu said.

He added that the quality of the gas is typical for shale and matches much of the production found in major shale basins in the US.

The company is now focusing its development efforts on an area of over 200 square kilometers (77 sq miles) and has drilled over 20 wells.

The average daily output from each well is at least 170,000 cu m, with one well in particular -- Jiaoye 1HF -- averaging over 300,000 cu m/day of production in the last one and a half years, Fu said.

"This gives us a good foundation to expand further in the area," Fu said, adding that the entire area of the Fuling block spans over 4,000 sq km.

Sinopec said it has developed a series of primary shale gas exploration and production technologies, including high quality fast drilling technologies, and actively explored and implemented a factory drilling operational model.

It has also developed a set of technologies for horizontal well staged fracturing which can "satisfy shale gas development needs".

Fu said the company is now working on reservoir depths of between 3,500 meters and 4,000 m, although reserves deeper than 4,500 m remain challenging both from a cost and technological perspective.

--Song Yen Ling, yenling.song@platts.com
--Edited by Jeremy Lovell, jeremy.lovell@platts.com