PetroChina sees shale accounting for one-fifth of gas output
Hong Kong (Platts)--23Aug2013/413 am EDT/813 GMT
Chinese state-owned PetroChina expects shale gas to ultimately account for about 20% of its total gas production and is now progressing plans to accelerate its domestic resources.
Speaking at a press conference to discuss its interim results Thursday, company president Wang Dongjin said its total unconventional gas production is forecast to reach 27.8 billion cubic meters/year (2.7 Bcf/d) by 2015. This volume would include tight gas, coalbed methane and shale gas, which is expected to reach 1.5 Bcm/year by 2015.
This would be up from 10.6 Bcm (1.8 Bcf/d) of unconventional gas production in the first half of this year, Wang said. PetroChina reported total domestic gas production of 1.4 Tcf for the first half, translating to 6.6 Bcf/d, an 8.1% year on year increase.
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Wang said PetroChina is now focusing on three core shale gas areas spanning 10,000 sq km in central China, with geological in-place reserves of about 4 Tcm, of which a quarter is estimated to be recoverable.
A pilot production phase has achieved output of 150,000 cu m/day, with another well in Sichuan currently producing 430,000 cu m/day he added. CONTINUED LOSSES ON GAS IMPORTS
The company recorded operating profit of Yuan 21.9 billion ($3.6 billion) in its natural gas segment, rising from just Yuan 1.6 billion in the first half of 2012.
However it continued to report losses totaling some Yuan 23.5 billion on natural gas imports. Its losses on Central Asian gas sales -- primarily from Turkmenistan -- totaled Yuan 15.9 billion while imported LNG sales resulted in losses of Yuan 11.6 billion. Management said it would work towards optimizing its natural gas segment following the introduction of a new pricing mechanism last month by the government.
On July 10 the central government raised gas prices to non-residential gas which resulted in the average citygate price -- or the delivered wholesale price of gas to each region -- rising by Yuan 0.26/cu m or 15.4% to Yuan 1.95/cu m ($8.90/MMBtu).
The government also introduced a new two-tier system for gas prices by differentiating between first tier existing supply using 2012 consumption of 112 Bcm, and a second tier of incremental supply, expected at 11 Bcm this year.
Incremental gas supply prices is now pegged to 85% of the average H2 2012 basket of fuel oil and LPG prices in a 60:40 ratio.
Wang said based on the new structure, PetroChina's gas prices for existing base supply rose by an average Yuan 0.18/cu m while prices for incremental supplies rose by Yuan 0.97/cu m, with the overall hike in its prices averaging Yuan 0.25/cu m. He added that the company expects to see an additional Yuan 20 billion in profit per year starting from 2014 as a result of these higher prices.
--Song Yen Ling, firstname.lastname@example.org
--Edited by Maurice Geller, email@example.com