State-owned Chinese oil and gas giant, Sinopec, announced Monday that its discovered a major shale gas field near Southwest China’s Chongqing. The Fu-Ling field has estimated reserves of 2.1 trillion cubic meters. It's also the first large-scale discovery of its kind in China.
The discovery in Chongqing’s Fuling district means that China can enter into large-scale commercial development of shale gas much earlier than anticipated. Sinopec’s Chairman -- Fu Chengyu -- says 10 years can now be cut off from China’s planned development time for shale gas energy.
"Our Fuling project, which will ultimately produce 10 billion cubic meters a year by 2017, will build shale gas capacity to 5 billion cubic meters a year by 2015." Fu Chenyu said.
The discovery of the Fuling field means China’s official target for annual shale gas production, 6.5 billion cubic meters a year, will be easily surpassed. But Sinopec may be faced with a cash squeeze as it looks to develop the field. That’s because SinoPec’s major competitor, PetroChina, reportedly will seek private investment in order to help it get into shale gas production.
Sinopec and state-owned PetroChina both cut their capital expenditures for 2014 from a year ago but analysts say Sinopec may have less flexibility on spending than its competitor. The reason for that is that PetroChina has a stronger balance sheet while Sinopec faces rising refining costs and weaker income from oil and gas production.