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Shell Sign Agreement with Chinese Energy Company to Extract Shale Gas

Fracking has revolutionised the US natural gas industry by enabling the extraction of previously unreachable shale gas. The shale gas industry is now huge in the US and volume of extraction is at phenomenal levels. Whilst other countries delve into fracking a little, it is fair to say that the US completely dominates the shale gas industry, both in terms of total reserves and production levels.

That is all about to change.

According to the Energy Information Association (EIA) China holds 1,275 trillion cubic feet of recoverable shale-gas reserves; more than the US. And it is now seriously looking to take advantage of those reserves.

Beijing has set targets of generating 10 percent of its energy needs from natural gas, and 15 percent from renewable sources by 2020, and is therefore investing billions of dollars in the appropriate sectors. However no matter how much money the Peoples Republic throw at shale gas, one of the largest challenges to developing a domestic industry is their lack of technical expertise in shale gas extraction. To overcome this China has been investing in US companies such as Frac Tech International, of whom Sinopec (the Chinese state owned energy company) owns 30 percent, in an attempt to learn the art of fracking. They are also looking for foreign companies to extract the gas for them.

On Wednesday Royal Dutch Shell announced that they have signed an agreement with the Chinese state-run energy company China National Petroleum Corporation (CNPC) to explore, develop and extract shale gas in a 3,500 square kilometre (2,170 square-mile) region in the southwest province of Sichuan.

Despite the fact that the agreement still needs government approval, Peter Voser, Shell’s chief executive, said that, “We are delighted about this new milestone in our strategic cooperation with CNPC. China has huge shale gas potential and we are committed to making a contribution in bringing that potential into reality.”

By. Joao Peixe of Oilprice.com



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