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China’s Shenhua Strikes JV Deal in Marcellus

A subsidiary of China’s largest coal company has signed an agreement with Denver-based Energy Corporation of America (ECA) to enter into a 50/50 joint venture to develop 25 natural gas wells in southwestern Pennsylvania’s Marcellus Shale over the next year and half.

Shenhua America Holdings Corp., a subsidiary of China’s Shenhua Energy, will contribute the first $90 million for ECA, the JV’s operator, to drill the wells, while future expenses will be evenly split, according to the agreement.

The 25 wells will be drilling southwestern Pennsylvania’s Green County, and the venture is targeting mostly dry gas, which will likely be sold domestically.

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According to ECA COO Kyle Mork, it’s not about exports for China’s Shenhua. “They’re looking at this as an investment in the US more than moving gas back to China.”

The joint venture is expected to produce 3.8 billion cubic meters of gas over the next three decades.

"It is only fitting for these operations to take place in Greene County... we are experts in shale gas development. We are very pleased to be working with Shenhua on this joint venture, and this is only the beginning of what, I hope, will be a long, mutually beneficial working relationship," CEO John Mork said in a statement.

It was just some two years ago that Shenhua began seeking to get a foothold in North America’s shale plays, and the Greene County deal represents Shenhua’s first foreign venture into shale gas.

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Shenhua, founded in 1995, is fully owned by the Chinese government and has 62 coal mines, producing 460 million tons of raw coal in 2012.

ECA has 1 million acres from New York to Tennessee and 4,600 wells and is one of the top five shale gas producers in southwestern Pennsylvania. ECA has 155 active wells in southwestern Pennsylvania and produced about 24 million cubic feet of natural gas in 2012.

By. Joao Peixe of Oilprice.com

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