SPT turns bullish on shale gas outlook

SPT Energy, a provider of oil and gas drilling services, expects the percentage contribution from shale gas projects to its revenues to triple in three years, as the development of nascent energy resource becomes more mature.

Wang Guoqiang, chairman of the Beijing-based company, which went public in Hong Kong two years ago, said revenues related to the drilling of shale gas - an unconventional natural gas that adheres tightly to shale rocks thousands of metres underground - would make up more than 10 per cent of revenues by 2016. This compares with 3 to 5 per cent currently.

"Industry people had anticipated large-scale production would come at least three to five years after wells drilling first started [two years ago]," he said. "Given the good drilling results [obtained recently by industry leaders PetroChina and Sinopec], we may get there earlier than expected."

A senior official at China Petroleum & Chemical (Sinopec), who declined to be named, said that despite the larger-than-expected amount of gas produced at some exploration wells, more wells needed to be drilled before the feasibility of large-scale production could be ascertained.

Development of unconventional gas sources requires advanced technology first commercially deployed in the United States. It includes the drilling of wells horizontal to the Earth's surface and the injection of water, sand and chemicals to fracture underground rocks for the gas to be released.

This requires the drilling of multiple wells that go in different directions underground to increase the surface area for gas to flow up, whereas conventional gas flows out easily from the drilling of a single vertical well.

PetroChina and Sinopec have drilled more than 70 exploration wells in Sichuan province and near Chongqing, where they have been asked by Beijing to build pilot projects to show mass production of shale gas can be economical.