Chinese state-controlled firms' focus on shale gas, as part of China's decarbonisation plans, offer a bright spot for domestic oil field services firms this year.
PetroChina and Sinopec plan to continue to boost shale gas exploration in 2021. Sinopec may raise output at its flagship Fuling project in southwest China's Chongqing from 6.7bn m³/yr last year to 7bn m³/yr this year, as part of a broader strategy to focus on gas. It is also expected to start drilling soon under a second phase programme to add 2bn m³/yr of output by 2022 at its Weirong shale project in Sichuan. The company this month completed building 1bn m³/yr of capacity at Weirong under a first phase programme and is producing 3.5mn m³/d currently.
PetroChina said this month it produced 11.6bn m³ of shale gas from southwest China last year, up by 3.6bn m³ on the previous year and is tipped to double shale gas output to up to 24bn m³ by 2025.
Sinopec's Hong Kong-listed oil field service arm Sinopec Oilfield reaped a fourfold increase in profit to 986.9mn yuan ($153mn) in 2019 with a rise in domestic oil and gas exploration. Sinopec's upstream capital expenditure rose by 46pc to Yn61.7bn that year, as Chinese state-controlled firms heeded a call by Chinese President Xi Jinping to boost domestic output. But Sinopec Oilfield blamed the Covid-19 pandemic and low oil prices for a 68pc slump from a year earlier in January-September 2020 profit to Yn231.7mn.
CNOOC's Hong Kong-listed oil field services arm COSL's profit rose by 1.7pc from a year earlier to Yn2.2bn during January-September last year after it booked an impairment loss of Yn869mn.
CNOOC is planning to focus on clean energy development projects including shale gas, coal-bed methane and tight gas during the next five years, chairman Wang Dongjin said in an internal meeting this month.
China reached 15.4bn m³ in shale gas output in 2019, up by 41pc from the previous year, according to government figures. But it is unlikely to hit its target to produce 30bn m³ in 2020.
Weirong, which Sinopec said holds 124.7bn m³ of reserves, has to be drilled at an average depth of 3,750m, Sinopec said. The company has completed 55 out of 56 wells it planned on drilling in the first 1bn m³ phase. Sinopec has so far drilled at a depth of 3,500-4,000m at Fuling. China's horizontal well drilling costs have fallen by an average Yn120mn to Yn55-65mn per well, according to estimates by analysts last year.
