(Refiles to fix typographical error in lead)
By John Kemp
LONDON, June 11 State-of-the-art American
fracking technology is coming to China's vast shale deposits as
a result of a joint venture between FTS International and
Sinopec announced on Tuesday.
SinoFTS, as the joint venture will be called, marks an
important milestone on the road to exporting the North American
shale revolution around the world.
FTSI, formerly known as Frac Tech, was one of the first
providers more than a decade ago of hydraulic fracturing
equipment and services in the Texas Barnett shale, the first
shale basin to be developed in the United States.
Since then, the company has grown into the largest supplier
of well completion services in U.S. shale formations, including
pressure pumping, wireline logging and water management.
FTSI has started to export its expertise around the world
through a series of strategic alliances. Since 2012, it has
concluded joint ventures with local partners in Brazil as well
as Saudi Arabia and Oman.
Other specialist shale drilling and fracking firms are also
taking their first steps overseas.
In March, Helmerich & Payne, one of the largest drillers in
North America, announced it will transfer 10 of its modern
FlexRigs to exploit Argentina's Vaca Muerta shale under a
five-year contract with state-owned YPF, which has teamed up
with Chevron (Platts Energy Economist, May 1).
Royal Dutch Shell is developing plans with local partners to
produce shale gas from beneath South Africa's Karoo semi-desert
But this is the first time that a specialist hydraulic
fracturing firm from North America has entered the Chinese
"SinoFTS will serve both Sinopec and other exploration and
production companies throughout China," FTSI announced.
The joint venture will initially concentrate on Sichuan,
China's most promising shale play, with operations expected to
commence there in 2015, but it expects eventually to deploy its
fleet of pressure pumping equipment to sedimentary basins
The joint venture will be based in Beijing and managed by a
team of experts drawn from both countries. It is an important
piece of technology and know-how transfer.
"SinoFTS will use new equipment that FTSI will
custom-manufacture in the United States, featuring the latest
innovations and adapted to the specific requirements of the
Chinese environment," FTSI said in a press release.
"FTSI will leverage insight from its own vertically
integrated U.S. operations to evaluate a similar vertical
integration model at SinoFTS."
ENORMOUS GAS POTENTIAL
China has the largest technically recoverable shale
resources in the world, according to updated estimates published
by the U.S. Energy Information Administration and Advanced
Resources International in 2013.
China's shale gas resources are half as much again as
Argentina or Algeria and double the United States. ("Technically
recoverable shale oil and shale gas resources: an assessment of
137 shale formations in 41 countries outside the United States"
"China has abundant shale gas and shale oil potential in
seven prospective basins," Advanced Resources explains.
More than half the technically recoverable resources lie in
the Sichuan basin beneath Sichuan province and the neighbouring
provincial-level city of Chongqing in southwestern China.
Sichuan has been producing natural gas from conventional
fields for more than 2,000 years and the area has been the heart
of China's small onshore gas industry.
The region has plenty of water for fracking, pipelines to
transport the gas away, and well-developed gas markets.
The basin contains at least three separate shale layers
which are thought to be prospective for gas at various depths,
ranging from the relatively shallow Permian-period
Changxing-Longtan formations to the Longmaxi and the ultra-deep
In theory, drillers could target all three layers in the
sort of stacked three-for-one play now common in Texas and North
Like North Dakota's Bakken, Sichuan's shale formations were
all deposited on the floor of ancient seas, rather than lakes,
which makes them more attractive.
Sichuan's "marine-deposited, quartz-rich, black shales of
Cambrian and Silurian age ... are roughly comparable to North
American analogs," according to Advanced Resources.
All the formations are thermally mature or over-mature,
which means the hydrocarbons have been cooked beyond the oil
stage and are now likely to yield mostly gas and condensates.
The total organic content is a bit lower than in the most
productive North American plays, ranging from 3-4 percent, but
coupled with the thermal maturity, there should be plenty of gas
locked in the formations. Low clay content makes them good for
Sichuan's shale formations lie thousands of feet below the
surface (up to three miles in some parts of the play) which
makes them harder but not impossible to tap.
The real problem is the geology in Sichuan, which is much
more complex than in North Dakota's Bakken or the Eagle Ford and
Permian in Texas.
The basin is heavily faulted and in parts seismically
active, both which make it much more complex to drill and frack.
The Sichuan earthquake, which occurred on the northwest
margin of the basin in 2008, had a magnitude of about 8.0 and
killed almost 70,000 people.
Much of the basin has been ruled out for fracking because it
is too faulted, too mountainous or contains too much deadly
hydrogen sulfide gas (which would be too expensive to remove).
In 2003, a sour gas well in a conventional field blew out and
killed 223 villagers.
Only the southwest corner is thought to meet the standard
criteria for shale development. Even here, drilling and fracking
is proving a challenge.
"The Sichuan basin's considerable structural complexity,
with extensive folding and faulting, appears to be a significant
risk for shale development," according to PetroChina.
PetroChina's first horizontal shale well took 11 months to
drill (compared with two weeks in the mature North American
plays) and produced a disappointing flow rate.
Shell tested a more successful well nearby but noted the
horizontal part kept wandering out of the target formation
because of complex faulting.
"Considerable work is needed to define the geological sweet
spots, develop the service sector's capacity to effectively and
economically drill and stimulate modern horizontal shale wells,
and install the surface infrastructure", Advanced Resources
concluded ("World shale oil and shale gas resources assessment"
AMERICAN SHALE EXPERTISE
China's shale plays are difficult to develop but not
Not every shale play is successful, even in the United
States. Of the 20 or so potential shale plays which have been
explored in the United States, almost all of the oil and gas has
come from around half a dozen. It is unlikely that all of
China's seven shale gas basins will be developed successfully in
the medium term.
Every shale play presents unique geological challenges that
have to be overcome. But that can only be done with a mixture of
persistence and experimentation.
It took almost 20 years to perfect the combination of
horizontal drilling and hydraulic fracturing that unlocked gas
from the Barnett shale and then spread to other North American
The United States has drilled tens of thousands of shale
wells so far, while China has drilled fewer than 100 in total.
Hundreds more wells need to be drilled to gain experience and
PetroChina and Sinopec, China's two major oil and gas
producers, are already experimenting in the Sichuan basin.
International majors including Shell, Chevron and Conoco are
However, FTSI brings the involvement of a specialist
fracking firm that has been present since the creation of the
shale revolution, which is why it is a major step forward.
No one knows where or when the next breakthrough will occur.
China, Argentina and South Africa are all plausible candidates
given their large shale gas resources and involvement of
The timing is impossible to predict. But it seems more
likely than not that one of these countries will emerge as a
significant producer within the next five years and the prize,
in terms of energy security, is enormous.
(Editing by Susan Thomas)