Reuters reported that Royal Dutch Shell and China National Petroleum Corporation plan to jointly develop natural gas deposits in China’s Sichuan province under 30 year production sharing agreement.

As per report, the 2 companies have submitted the PSA to China’s central government for approval.

Shell said that the tight gas reservoirs were located in 4,000 square kilometers area in the Jinqiu block in Sichuan. Tight gas is contained in rock that must be fractured or broken before it can flow easily to production wells.

Mr Malcolm Brinded Shell’s ED of upstream international said that the agreement will strengthen our partnership with CNPC in developing cleaner energy to meet China’s growing needs.

CNPC is the parent of PetroChina, which is jointly bidding with Shell to buy Australia’s Arrow Energy for USD 3.1 billion. Shell and PetroChina are already operating Changbei, a tight gas field in the Ordos Basin in Shaanxi province, which began commercial production in March 2007 and now supplies 3 billion cubic meters per year to Beijing and eastern China.

The statement said that in January, they began jointly assessing a shale gas field in Sichuan in the Fushun block that covers about 4,000 square kilometers.

Mr Peter Voser CEO of Shell said last week that the company had the resource potential to more than double production from its North American tight gas fields to over 400,000 barrels of oil equivalent per day by 2020.

He told analysts on a strategy update conference call, while discussing the North American assets that economics are attractive in USD 4 to USD 6 gas price range. As we continue with the appraisal and development program in tight gas, we are seeing sharp improvements in drilling costs and reduced drilling time. This improves the economics of these developments and I think there is more to come here.

(Sourced from Reuters)