​​​​BP Plans to Exit China's Shale Gas

By Meng Meng and Chen Aizhu
Thursday, April 11, 2019

European oil major BP plans to exit from two production sharing contracts (PSC) for projects drilling for shale gas in the southwestern Chinese province of Sichuan, three sources with the knowledge of the matter said this week.

BP is the last of the international oil majors, including Royal Dutch Shell, Exxon Mobil, ConocoPhillips and ENI, to quit exploring for shale gas in China because of poor drilling results. Its departure leaves the sector firmly in the hands of domestic companies.

In March 2016, BP agreed with China National Petroleum Corp (CNPC) to explore and produce natural gas from shale rock formations in the Neijiang-Dazu block in Sichuan, its first such contract in China.

It inked a second PSC on the Rongchangbei block later in 2016. CNPC was the operator in both deals.

BP no longer wants to proceed with the Sichuan projects after drilling eight to 10 wells with disappointing results, two of the three sources said.

One of the wells, the Wei 206-H1 that was drilled to a depth of 4,368 metres (14,300 feet) in the Neijiang-Dazu block, produced about 10,000 cubic metres a day of gas during test production, a fraction of the output from a typical CNPC shale gas well in the same geological zone, IHS Markit said in a research note.

China is only just beginning to develop its vast shale gas resources with production last year making up only 6 percent of total natural gas output, because of geology that makes gas extraction difficult and a challenging operating environment.

With BP and the other oil majors gone, PetroChina Co , CNPC's listed arm, and Sinopec Corp are likely to dominate China's shale gas sector using low-cost technology and services developed domestically.

BP's Chief Executive Officer Bob Dudley said last week at a conference in Shanghai that the Sichuan projects faced "great challenges" because of its complex geology.

To overcome those problems, BP used technology from its shale developments in the United States at the Sichuan site, Chinese business news portal The Paper reported.

BP did not immediately respond to request for comment. PetroChina declined to comment.

Zhu Kunfeng, a Beijing-based associate director of upstream research with IHS Markit, said poor economics are the key reason holding BP back from pursuing further in Sichuan.

"As the last trial for IOCs on China's shale gas, BP's decision will impact foreign firms' confidence in China's shale gas sector," Zhu said.


($1 = 6.7123 Chinese yuan renminbi)

(Reporting by Chen Aizhu in SINGAPORE and Meng Meng in SHANGHAI; editing by Christian Schmollinger)

Categories: Shale Oil & Gas Drilling Asia

Related Stories

ORE Catapult and Japan’s FLOWRA to Jointly Advance Floating Wind

Second Hai Long Substation Heads to Project Site Offshore Taiwan

Shell Predicts 60% Rise in LNG Demand by 2040 with Asia Leading the Way

Initial Drilling Results Raise Questions on South Korea’s Offshore Gas Viability

US Operator Finds Oil Offshore Vietnam

ADES’ Fourth Suspended Jack-Up Rig Gets Work Offshore Thailand

Transocean’s Drillship to Stay in India Under New $111M Deal

Sembcorp Signs 10-Year LNG Supply Contract with Chevron

Valeura Boosts Production at Jasmine Field with Five New Wells Now Onstream

Sapura Scoops Petrobras Contract for Pan-Malaysia Offshore Services

Current News

Jadestone Submits Field Development Plan for Assets Off Vietnam

Woodside Inks Long-Term LNG Supply Deal with China Resources

CNOOC Starts Production at Two New Oil and Gas Projects

Argentina YPF to Shed Offshore Exploration Projects

Cairn India Might Invest in US Oil Servicing Firms to Increase Production

All Gas from Conrad’s Mako Field to be Sold to Indonesia’s PLN

ORE Catapult and Japan’s FLOWRA to Jointly Advance Floating Wind

Shell Hires Noble’s Drillship for Work in Southeast Asia

Second Hai Long Substation Heads to Project Site Offshore Taiwan

Shell Launches Next Phase of Malaysia's Deepwater Project with First Oil Production

Subscribe for AOG Digital E‑News

AOG Digital E-News is the subsea industry's largest circulation and most authoritative ENews Service, delivered to your Email three times per week

https://accounts.newwavemedia.com