China Petrochemical targets China shale gas reserves

Oil and gas giant China Petrochemical Corp's formation of two joint ventures with overseas drilling technology firms in the past month could pave the way for technology transfers that would help unlock the mainland's vast untapped shale gas resources.

Analysts said China Petrochemical's drilling services ventures with Switzerland's Weatherford International and FTS International of the United States would also boost the image of Sinopec Oilfield Service, a unit of subsidiary China Petroleum & Chemical Corp (Sinopec), which it hopes to spin off for a listing.

FTSI said last week it had agreed to form a 15-year joint venture with China Petrochemical that would see the mainland benefit from FTSI's expertise in fracturing underground rock formations to release hard-to-extract oil and gas.

FTSI chief executive Greg Lanham said the joint venture would initially invest US$55 million to US$70 million on facilities to serve Sinopec's shale gas projects in Sichuan province. Other gas drillers on the mainland could also become customers of the venture later.

The venture will be 55 per cent owned by China Petrochemical and 45 per cent by FTSI.

Equipment manufacturing would initially be conducted entirely in the US, but some work might migrate to China over a three to four-year horizon to reap potential savings, Lanham said.

The venture planned to provide fracturing services for two to six wells a month for Sinopec at first, and its initial annual work volume was projected at US$50 million, he said.