Tag Archives: PetroChina

Shell applies for 25-year natural gas export licence

(Source: Globe & Mail) Royal Dutch Shell plc and its three Asian partners have applied to export an enormous volume of natural gas from the British Columbia coast, as global attention begins to focus on the movement of Canadian energy to Japan, China and other markets.

On Friday, Shell said it had applied to the National Energy Board for a licence to export up to 24-million tonnes per year of natural gas. That is equivalent to 3.4-billion cubic feet per day, fully a quarter of Canada’s entire output in 2011.

Shell, which has partnered with Korea Gas Corp., Mitsubishi Corp. and PetroChina on an export terminal slated for Kitimat, B.C., is asking for approval to export gas for 25 years.

The partners intend to build their initial terminal to half the capacity they are requesting, “with an option to expand the project to a total of four units or 24 million tonnes,” spokesman David Williams said in a statement.

“The application is an important milestone in the regulatory process and assures that there are sufficient natural gas reserves in Canada to meet domestic needs and exports.”

Outside of export possibilities, Canada’s natural gas industry faces tremendous challenges. The discovery of large new supplies of natural gas in the U.S. have raised concerns that Canadian gas will, over the course of the next decade, no longer be needed south of the border.

At the same time, northeastern British Columbia has proven to possess enormous gas reserves. In June, for example, Apache Corp. said it had drilled a well in the province’s far northern Liard play that was the most prolific shale gas test in the world. Apache is leading a separate project to build an LNG export terminal in Kitimat.

Shell has declined to estimate the cost of its terminal. On Friday, however, TransCanada Corp. chief executive Russ Girling pegged it at $12-billion, plus a $4-billion pipeline to deliver gas from the B.C. northeast.

Natural gas exports offer the possibility of selling gas into international markets, where gas prices are linked to oil prices, and are much higher as a result.


Canada’s Natural gas production is under threat if it can’t find new markets

This past Tuesday, Shell Canada declared an official launch to a liquefied natural gas (“LNG”) terminal project in Kitimat, B.C. The multi-billion-dollar plant would load and esimtated 1.2 billion cubic feet per day onto LNG tankers. The project partnership, gives shell a 40 per cent interest, and 20 per cent each to Korea Gas Corp., Mitsubishi Corp., and PetroChina Co. Ltd.

With the increased production in the US and the US becoming an exporter of natural gas, it is critical for Canada to find an alternative market for Canadian natuarl gas. The only way to do this is through export via a LNG export facility.

One potential problem is that Kitimat LNG is primarily owned by American companies where other interests and politics could come into play and its corporate backers (Apache Corp. EOG Reources etc) have delayed an investment decision that was expected for early this year. An Asian backed LNG project may have a better chance of success given the huge and growing demand for natural gas in Asia. Having your customers finance the facility and participate in the ownership has a different set of motivating factors to influence the investment decision.

The take-away here is that Canada is at a critical juncture in saving their natural gas industry, and growing it by tapping into the global LNG distribution network. Certainly a point highlighed by Shell Canada president Lorraine Mitchelmore who referred to not openting up Asian markets “We are at risk. You have to find a market for this product.”

Hopefully, Kitimat LNG, and Shell’s project are not too late. Shell is leading their partnership project and intends to start front-end engineering and design on the terminal in 2013. A final investment decision could come in 2015, with construction complete by the end of the decade.

Related articles:

Globe & Mail: Shell urges quick action to secure LNG markets for Kitimat terminal

Globe & Mail: PetroChina takes stake in Shell gas field in B.C.

China eyes tech breakthrough before shale gas leap

The following story is a must read for those interested in fully understanding China’s current situation for unlocking its vast wealth of shale gas.

BEIJING – (Source: National Post) China wants to identify the right technology to unlock its potentially large shale gas resource in the next few years, aiming for a leap in shale production by 2020, two years after it embarked on a search of the unconventional fuel.

Top energy agency, the National Energy Administration (NEA) officially unveiled on Friday a target to produce 6.5 billion cubic metres (bcm) of shale gas by 2015, or roughly 6% of China’s current total gas production.

But it intends to dramatically boost output to 60-100 bcm in 2020, a level some experts say is over-ambitious as it faces techonological, environmental and regulatory roadblocks.

“The U.S. technologies may not be fully applicable in China’s shale gas formation, they need to be revamped,” Zhang Yuqing, NEA’s head of Oil and Gas Department, said.

“The main task in the 12th five-year period is to lay a good foundation, especially some key technologies in shale gas exploration and development.”

China started the shale push in late 2009, inspired by a shale boom in the United States. Its state energy firms have since then entered multi-billion-dollar shale deals in the United States with Chesapeake Energy and Devon Energy Corp.

At home companies have drilled several dozens of wells and brought in firms such as Royal Dutch Shell, Chevron Corp and Hess Corp for joint studies.

But China has yet to start commercial shale production, though it is widely believed to hold the world’s largest shale resource.

The Ministry of Land and Resources revealed early this month China may hold 25.08 trillion cubic metres (tcm) of potentially recoverable shale gas resources. That compared to a U.S. Energy Informationa Agency’s forecast in March 2011 at some 36 tcm.

NEA’s Zhang said foreign firms can enter product sharing contracts with Chinese firms or provide engineering services.

Shell, which has done more exploration works in China than the rest of foreign firms – having drilled an estimated five wells in the southwest Sichuan basin, has yet to land a PSC contract with partner PetroChina 0857.HK, an industry executive has told Reuters.

China aims to complete an evaluation of national shale gas resource potential, make shale gas technology improvements, and localise the manufacture of major equipment by 2015. It will also establish industry standards and perfect government policies, according to the NEA plan.

Exploration will focus on finding 600 bcm of proven geological shale gas reserves and 200 bcm of recoverable deposits by 2015.

Read the full story.

PetroChina in $5.4bn Canada gas buy

PetroChina has agreed to pay C$5.4bn (US$5.4bn) for a 50% stake in a large natural gas field in western Canada owned by Encana, the Calgary-based oil and gas producer.


International interest grows in China’s shale gas potential

International interest in China’s shale gas potential continues to grow, Sinopec and BP are in discussions to collaborate on the exploration and development of shale gas in China. Back in November, a joint development agreement was signed between Royal Dutch Shell and PetroChina for a shale gas project  in Sichuan, south-west China.

According to a the Financial Post, Sinopec stated in a company newsletter that talks with BP were going “smoothly” and that any agreement would help China use foreign technology to speed up the development of its potentially large shale gas reserves.

No details have been disclosed by Sinopec or BP, but reports indicate an agreement between the two companies would might include two blocks it has charted by Sinopec consisting of  a 2,000 square kilometre area in Kaili, in southwestern Guizhou province and a 1,000 square kilometre block in Huangqiao, Jiangsu, a province in eastern China

A major shale gas discovery – like one in Europe – would have considerable implications for the natural gas market. Natural gas provides China a cleaner alternative fuel source to oil and coal and the Chinese government is eager to develope their natural gas resources. Back in November, when President Barack Obama visited China,  the US and Chinese governments signed a co-operation initiative to promote investment and joint studies of China’s shale gas potential.

Coal-fired electric power plants are a major contributor to CO2 emissions in China, who is well aware of the effects of these emissions on air quality and health for China’s population. China is moving in the right direction and has reduced coal consumption in the last year. A good portion being offset by increasing nuclear power generation by approximately 75% last year with new state-of-the-art nuclear power facilities (and more to come). And despite its own domestic production potential China continues to secure natural gas sources including a deal announced with Russia back in October 2009. It is apparent that China clearly sees natural gas as an important and growing part of their energy needs within a lower carbon energy mix.

Anyone who has traveled to China’s major cities has seen, and tasted the pollution in the air. It is obvious that no one understands the importance of reducing the carbon emissions better then China and they are moving in the right direction with natural gas as part of the solution.

Financial Times: BP and Sinopec join forces in shale gas talks

China faces intensified gas shortages

At the same time that PetroChina backed out of a natural gas deal with Woodside, China is facing intensified gas shortages as cold weather hammers many parts of China.

Beijing has seen its lowest temperatures in 40 years and is facing traffic chaos, fuel shortages, and electricity rationing. This cold snap in China demonstrates how critical acquiring energy sources is to meeting China’s growing energy needs. Push it to the limits and problems start occur. But despite these pressures to acquire energy sources, China is savy in their investment decisions  as exampled by the PetroChina / Woodside deal collapse. They do have options, and as shale gas is unlocked those options may increase.

The system is very fragile and the natural gas distribution network needs much improvement.

PetroChina pulls out of $40 Billion Australia natural gas deal

Woodside Petroleum Ltd. Australia’s second-largest oil and gas producer, has stated that an initial deal with PetroChina signed in 2007 for the potential sale of 2 to 3 million tonnes per year of LNG from Woodside’s  Browse LNG project, expired on Dec. 31 and the two parties were unable to reach an agreement to extend the deal.

Most analysts have stated PetroChina will seek other sources for natural gas which may create an opportunity for the Horn River basin and the planned LNG export facilities located in Kitimat, BC. There are two facilities currently being worked on in this area; a traditional land based LNG facility and a floating LNG processing plant. The land-based facility, Kitimat LNG has already entered into two supply deals one with Korgas of Korea, and Gas Natural of Spain. A deal with PetroChina would be icing on the cake.

As shale gas has fundamentally changed the natural gas market in North American by dramatically increasing the amount of reserves available, producers will need to open new markets outside the U.S. because the U.S. itself is seeing a 40% increase in domestic supplies. On the other hand, industry and governments need to consider this new abundance of natural gas as a cleaner alternative to oil and coal with international pressures to reduce CO2 emissions continues.

ABC News: China Pulls out of $40 Billion Australia Gas Deal

Shell, PetroChina to develop shale gas in China

Royal Dutch Shell and PetroChina Co. have signed an agreement to jointly develop the first shale gas resources in southwestern China’s Sichuan province. Beijing wants natural gas to account for 5% of the nation’s energy mix by 2010, 10% of the nation’s energy mix by 2020. An early winter with low temperatures have increased recent demand and caused natural gas shortages in parts of China (See Horn River News: Winter weather triggers natural gas shortage – in China)

The joint venture will further assess China’s shale gas potential and make way for more foreign cooperation opportunities. North America has lead the world in shale gas development which has fundamentally changed how natural gas is viewed as an abundant, low carbon energy source in North America. Developing shale gas resources in China’s  Sichuan basin opens a new opportunity for China to meet growing energy demands with domestic Chinese natural gas resources contributing more to China’s overall energy mix. Its only a matter of time before a “Horn River basin” is discovered outside of North America.

Wall Street Journal: Shell, PetroChina to Develop Shale Gas in Sichuan

Is PetroChina next to buy BC’s Horn River natural gas?

Petrochina_logoChinese energy giant PetroChina (NYSE:PTR) closed a deal to buy US$41 billion worth of Australian liquefied natural gas over the next 20 years. The gas will come from Exxon Mobil Corp.’s (NYSE:XOM) 25% share of the Gorgon gas field development off Australia’s west coast. Exxon Mobil  recently announced a “world  class” discovery in their Horn River project located in northeast British Columbia reporting initial flow rates of 16 to 18 Mcf/day on three horizontal wells. Exxon Mobil has stated that the Horn River project will be a major asset for them.

Given China’s growing appetite for energy, and their efforts to reduce carbon emissions, the Chinese have looked towards natural gas as a practical energy solution. The Chinese have not hesitated in cutting deals with anyone that has the resources they are seeking to acquire. PetroChina is building or planning LNG terminals (for importing LNG) at Dalian in Liaoning province, Rudong in Jiangsu province, Tangshan in Hebei province, and Shenzhen in Guangdong.

Meanwhile, Kitimat LNG has been doing all the right things in putting together LNG buyers and  natural gas suppliers for their LNG processing plant in Kitimat, British Columbia. Committed buyers include Korea Gas Corp, and Gas Natural of Spain, while committed natural gas suppliers include EOG Resources and Apache Corp. So it seems logical that Exxon Mobil (supplier) and PetroChina (LNG buyer) should be next to close deals with Kitimat LNG. Following preview agreements, PetroChina would likely be given an equity option in Kitimat LNG.  Note: Finance Minister Jim Flaherty invited Chinese investment in the Canadian energy sector (see Calgary Herald: “Flaherty urges China to buy Canada”)

Wall Street Journal: “PetroChina Signs LNG Deal with Exxon”