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Chongqing sets shale-gas target

Southwestern China’s Chongqing municipality aims to produce between 1.3 billion and 1.5 billion cubic metres per year (cm/y) of shale-gas by 2015 – a volume which would account for 20% of the national production target for that year

To achieve that goal, the municipal authorities plan to drill between 150 and 200 wells in pilot areas by 2015, with another 350 wells planned for the 2015-20 period.

Chongqing, one of China's four directly controlled municipalities, is estimated to have 12.75 trillion cm of in-place shale-gas reserves, of which 2.05 trillion cm are believed to be recoverable, according to the Ministry of Land and Resources. The reserves are spread over an area of 40,000 square km, with 30,000 square km under licences controlled by national oil companies Sinopec and PetroChina.

Chongqing will participate in China's second shale-gas licensing round, which could take place in September, Mayor Huang Qifan said, adding that state-run, independent, domestic and foreign companies were all welcome to invest.

However, he admitted there were several challenges to overcome before hitting the production target, including a shortage of gas pipelines and a lack of shale-gas development technology.

In late June, China's State Development and Investment Corporation (SDIC) said it would invest 30 billion yuan ($4.7 billion) to explore for shale gas in Chongqing. Meanwhile, Sinopec has already spent 85 million yuan of the 148 million yuan it plans to invest in shale-gas exploration in Chongqing this year, having drilled two wells, one of which has already proved commercial, a local government official said.

A five-year plan outlined by China's National Development and Reform Commission (NDRC) earlier this year envisages shale-gas production of 6.5 billion cm by 2015, and between 60 billion and 100 billion cm by the end of 2020 - almost equivalent to China's overall domestic gas production of 103 billion cm last year.

Four of China’s 19 frontier regions identified for pilot exploration by the NDRC in the 12th five-year industrial plan are in Chongqing.

China's first shale gas well, Yuye-1, was drilled in Chongqing in 2009 and the municipality’s 2015 target suggests Chongqing is set to continue spearheading shale-gas development in China over the next few years alongside Sichuan province, noted Tom Grieder, an analyst at IHS Global Insight.

Chongqing's 2015 output target will be bolstered by Sinopec's planned 1 billion cm/y production capacity at the Fuling Block in Lianping county by 2013. Addition production after 2015 could come from the Nanchuan Block awarded to Sinopec in China's first shale-gas licensing round, given that the exploration period is set to finish in July 2014.

The Chongqing government hopes to accelerate investment in the sector via a joint venture with SDIC. A strategic alliance agreement has also been signed with oil service provider Schlumberger to overcome technical challenges associated with resource exploration and development.

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