Who are the main shale players?
The Majors took a run at China's vast shale resources during the first few years of the decade, but all exited after lacklustre results. Only BP now remains with two undeveloped shale production sharing contracts.
The Chinese NOCs, however, have overcome these challenges by developing their own understanding of the unique geology, relying on their own service arms to get more experience and, most importantly, progress in completion techniques and technology.
They have adopted a pad-based drilling, fracturing and production process, which reduces the footprint of the well sites on the mountains. This practice, combined with more indigenous technology and drilling and completion techniques – fracturing trucks, drillable bridge plugs, and drilling trajectory control know-how for example – have helped to save drilling time and reduce costs, while wells are becoming larger.
What about shale well costs?
While Chinese shale well costs are still much higher compared to the US, (even 20% higher compared to a deeper and larger well in the Haynesville) a recent turnkey contract for drilling, cementing and completion of four Sichuan wells won by domestic oil services company Honghua Group, could perhaps hint at a new chapter in Chinese shale. The contract would imply an all-in cost at US$7-7.5 million per well, a further 20% drop in well cost compared to 2017, once pad construction, infrastructure and facilities costs are included.
While we don't expect a Chinese shale gas boom anytime soon, the NOCs will no doubt continue to push on and innovate, driven by the need to secure and develop energy resources for strategic reasons.
Can China deliver a shale gas boom by 2020? Buy the full report or talk to us at the CWC China LNG & Gas Summit in Beijing next week.