Exxon Mobil in Talks to Develop China Gas Field
Exxon Mobil Corp. is in talks with PetroChina Co. to jointly explore and develop an unconventional gas block in the resource-rich Ordos basin in northern China, according to a person familiar with the matter.
A successful conclusion to the talks would mark the entry of another global energy major into a huge but undeveloped sector that China hasn’t been able to develop because of a lack of technical expertise.
The discussions have been under way since early June. If they succeed, the companies will sign a production-sharing contract and drill appraisal wells, the person said.
A PetroChina official said the company is interested in developing unconventional gas in China and noted that there has been success in the development of unconventional gas in the U.S. from, for example, shale.
He wouldn’t confirm if talks with Exxon Mobil are under way but said agreements of this sort with foreign partners would only be announced when deals were settled.
Exxon Mobil China media official Sarah Du declined to comment.
The U.S. company is well-established in China’s downstream, or refining, sector, including partnerships with 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 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. The rock must be fractured or broken open to release the gas.
France’s Total SA expects the Chinese government will approve its tight-gas joint-venture 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 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 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. 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 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.