U.S. oil major Exxon Mobil
Corp. (XOM) is in talks with PetroChina Co. (PTR) to jointly explore
and develop an unconventional gas block in the resource-rich Ordos basin
in north China, a person who has direct knowledge of the matter told
Dow Jones Newswires.
A successful conclusion to the talks would mark the entry of
another global energy major into China's huge but undeveloped shale or
tight gas sector, which China hasn't been able to develop due to a lack
of technical expertise.
The discussions have been under way since Exxon Mobil's
upstream team visited Beijing in early June.
If they succeed, the companies will sign a production sharing
contract and then drill appraisal wells, the person said, declining to
be named.
The unconventional gas block being targeted has tight gas
reserves, a second source said, who also declined to be identified.
A PetroChina media official said the company is very
interested in developing unconventional gas in China, and noted that
there had been great success in the development of unconventional gas in
the U.S.
He wouldn't confirm if talks with Exxon Mobil
are underway, but said agreements of this sort with foreign partners
would only be announced when deals were settled.
The U.S. company is well established in China's downstream
sector, including in partnering China Petroleum & Chemical Corp., or
Sinopec, the Fujian provincial government and Saudi Aramco in a $4.5
billion refining and petrochemical complex in Fujian province.
In March, Royal Dutch Shell PLC (RDSB) signed a 30-year
contract with China National Petroleum Corp., parent company of
PetroChina, to jointly develop tight gas reserves in central China's
Sichuan Province.
Tight gas is natural gas contained in rock that must be
fractured or broken open before it can flow easily to production wells.
France's Total SA (TOT) expects the Chinese government will
approve its tight gas joint-venture South Sulige gas project, also in
the Ordos Basin, "in a few months", Jean-Marie Guillermou, senior vice
president for Asia Pacific, Exploration and Production said in June.
CNPC will be the operator of the field, and Total will have a
45% stake, he said.
Earlier this month, BP PLC (BP.LN) and PetroChina agreed to
cooperate in coal-bed methane development at the Sha Erhu block at Tuha
basin in Xinjiang Uighur Autonomous Region.
Also, Sinopec Group is working with BP in shale gas resource
assessment in China's Guizhou and Jiangsu provinces.
CNPC is keen to gain the know how to develop such gas
deposits. In June, it signed an initial agreement with Canada's Encana
Corp. (ECA) to develop shale gas reserves in Canada, under which it
would "gain an advanced understanding of unconventional natural gas
development through an ongoing sharing of technical knowledge," Encana
said at the time.
Exxon clearly demonstrated its interest in unconventional gas
last year, with its $41 billion purchase of XTO Energy Inc, which has
major tight gas assets in the U.S.