(Reuters) - China’s fracking support industry has grown rapidly over the past decade and now makes everything from fracking trucks and pumps to proppants, while local service providers are learning to match global rivals like Schlumberger and Baker Hughes.
State majors Sinopec and CNPC produced 9 billion cubic metres (bcm) of shale gas in 2017 from 600 wells, six percent of the country’s total gas output. Production is forecast to double to 17 bcm in 2020, which will include production from another 700 wells, said consultancy Wood Mackenzie.
China’s shale gas reserves are buried deeper, more scattered and in more mountainous terrain than in the United States, making them more costly to develop, but domestic gas is a major focus as the country looks to ease its reliance on dirtier coal.
Reuters interviewed Chinese oil majors, local equipment and service companies and global firms involved in China’s fracking industry to compile the following industry breakdown.
Jingzhou-based Jianghan No.4 Machinery Plant, a unit of Sinopec Oilfield Equipment Corp (000852.SZ), is China’s leading manufacturer of fracking equipment.
The firm bought several dozen U.S. fracking trucks in 1988 on condition it be allowed access to the technology, and clinched a similar technology transfer deal in the same year with U.S. company SPM, acquired by the Weir Group in 2007, that makes equipment designed for high-pressure fracturing and handling fracking fluids.
Jianghan benefited from hundreds of millions of yuan in grants for special national technological projects to help develop its fleet, a company official said.
The company has built several hundred fracking trucks and primarily supplies Sinopec, China’s leading shale gas producer.
Baoshi Machinery Co Ltd, controlled by state energy group CNPC, is also a major producer of fracking equipment.
Industry service provider Sichuan Honghua Petroleum Equipment Co. Ltd, 30 percent controlled by state-run China Aerospace Science & Industry Corp, began making eletric-powered fracking pumps in 2015. It currently has 20 units under lease to Sinopec and PetroChina.
Electric frackers, which have been adopted in the United States by companies like Evolution Well Services and U.S. Well Services, are smaller and quieter than diesel equipment and cut fuel costs by half.
They are also more than twice as powerful as regular diesel frackers, but require easy access to power grids.
SJS, a joint venture between Sinopec Oilfield Equipment and U.S. Serva Group, makes bridge plugs, used to isolate zones in shale drilling. Sinopec officials said the SJS plugs cost a fraction of competing products.
The oil price crash of 2014 forced Sinopec and CNPC to build up internal teams as they cut down on foreign service providers to slash drilling costs.
CNPC’s main services arms are Chuanqing Drilling and Prospecting, Greatwall Drilling, Xibu Drilling, Bohai Drilling. Sinopec operates six regional service providers such as Jianghan, Zhongyuan and Shengli.
As drilling has picked up with a rebound in oil prices, local independents such as Anton Oilfield Services (3337.HK), SPT Energy Group (1251.HK), Honghua International and Jereh (002353.SZ) have returned, mostly as subcontractors to state firms.
SPT said in May that it won a 428 million yuan ($68 million) contract to drill 14 wells in Sichuan that includes drilling, fracturing and test production.
Honghua separately agreed to drill four wells for 240 million yuan. Anton late last year won a 100 million yuan deal to drill four shale wells in Sichuan for PetroChina. The deal does not include equipment.
“We’re hoping to see freer competition among service providers, rather than being just second options,” said a top executive with an independent service provider.
Reporting by Chen Aizhu; editing by Richard Pullin