* Sinopec unit wants to boost development at key Fuling
* Hopes to cut costs through drilling a few wells at once
* China has been struggling to unlock its massive shale gas
By Chen Aizhu and Judy Hua
BEIJING, Oct 28 Chinese oil giant Sinopec Corp
is for the first time pumping shale gas
from test wells in commercial quantities in what it hopes will
be a breakthrough in the development of a badly needed new
Stymied by the cost of drilling and complexity of tapping
shale gas, China has struggled in its bid to revolutionize its
energy supplies and unlock what may be the world's largest shale
gas reserves by emulating the frenetic exploration and
production of the U.S. shale boom.
But the state-owned firm's Sinopec Jianghan unit has more
than doubled its 2015 output target for the key shale area of
Fuling in the country's southwest after successful pilot
drilling, hoping to cut costs through measures such as drilling
numerous wells at once and recycling fracking liquids.
That is good news for Beijing, where calls to exploit shale
have taken on greater urgency due to a domestic shortage of gas
supplies and longer term plans to prioritise gas-fired energy
production as part of a battle to clear China's notoriously
"The high yield in the Fuling area proves more evidence that
the Sichuan basin is promising in terms of shale gas development
and lays the foundation for commercial production in the area,"
said a Sinopec Jianghan official with direct knowledge of the
Fuling drilling, adding that another 50 or so wells are planned
for commercial development in 2014. He declined to be named as
he is not authorised to speak with media.
Sinopec has drilled nearly 30 pilot shale gas wells in the
Fuling area of Chongqing municipality in southwest China, part
of the Sichuan basin - one of the most promising geological
zones for the unconventional fuel.
Six of the wells are pumping a daily combined rate of 1.06
million cubic metres of gas, according to state media and the
Sinopec official, or an average of nearly 180,000 cubic metres
They are among the most prolific of the total of around 150
wells Chinese companies have sunk over the past three years in
pilot explorations. That has led the operator to target an
annual production capacity to be built at the field of 5 billion
cubic metres (bcm) by the end of 2015, the source said.
That would dwarf company estimates reported by local media
in July of around 2 bcm for the whole of Sinopec's shale output
by 2015, and would be 100 times greater than China's estimated
output last year of just over 50 million cubic metres from all
test drilling at shale formations.
Slow development of China's enormous shale gas reserves had
cast into doubt even a modest 2015 output target of 6.5 bcm, but
the development of Fuling should make this goal far more likely.
A Sinopec Corp spokesperson said the company was evaluating
the Fuling reserves and expected to come to a conclusion on
possible commercial development around year-end.
To reach and sustain output of 5 bcm a year, Sinopec would
need to drill around 170 wells, each pumping 100,000 cubic
Of the six Fuling wells that are recording steady test
flows, one has daily production as high as 547,000 cubic metres,
according to the Sinopec official and a report earlier this
month by the official Xinhua news agency.
With limited participation from established global service
companies such as Baker Hughes and Schlumberger,
Sinopec's Jianghan team has improved in key areas such as
fracturing and logging - the process of making detailed records
of geological formations.
At one well, Sinopec Jianghan executed a 22-stage fracturing
process at a depth of 1,500-metre - a challenging task for a
company with limited experience of such a complex procedure.
Key for commercial production is whether companies can
locate high-yielding shale formations and then drive down costs.
Sinopec's Jianghan unit aims to halve drilling costs from a
hefty 80-100 million yuan per well ($13-16.6 million) currently,
said the official and the Xinhua report.
Shortening each well's drilling period from the current
average of 70-75 days by drilling a few wells at the same time
is one of the most effective ways of achieving this due to
economies of scale, said industry officials. Cost savings will
also come from multi-directional horizontal drilling and
recycling fracking fluids, officials said.
And the Fuling development looks set to help Sinopec take
the lead in Chinese shale gas, overtaking China's top energy
"Compared with PetroChina, Sinopec is weaker in (broad)
upstream development. It's keen for a breakthrough." said a
government official involved in shale gas planning.
PetroChina is China's leading gas producer and has carried
out some successful pilot drilling in the Weiyuan area of the
Sichuan basin, but has announced a modest target of 2 bcm of
shale gas production by 2015 as it continues to focus on other
oil and gas projects.