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Schlumberger strengthens China shale ties

Oilfield services company to expand Chinese operations after buying stake in Anton Oilfield Services

Oilfield services company Schlumberger is set to expand its operations in China’s shale-gas sector after buying a stake in Hong Kong-based Anton Oilfield Services Group.

Schlumberger bought a 20.1% interest in Anton, making it the second largest shareholder in the company, which provides operational services for China’s shale-gas developers.

With the deal, Schlumberger gains access to China’s largest energy producers – China National Petroleum Corporation (CNPC) and Sinopec – the two national oil companies are Anton’s primary clients.

Anton said that Schlumberger would help improve its hydraulic fracturing (fracking) technology, while its local focus will allow the services giant to expand its footprint in China.

The pair first agreed a strategic cooperation agreement in 2010, covering drilling fluids and well-cementing services. Anton has also been working with Schlumberger in gas storage and exploration in the Tarim basin in northwestern China.

It’s still early days for China’s shale gas industry and production is nowhere near the commercial stage. But with potentially the world’s largest reserves of shale gas – estimated at up to 1,275 trillion cubic feet (cf) of technically recoverable reserves – foreign firms are eager to team up with local companies to help tap China’s enormous potential.

That potential is drawing significant interest not only from international oil companies, but also foreign oilfield service outfits. Analysts at Barclays have pointed to China as one of the “most compelling” emerging markets for international service providers. And with the country’s second shale-gas licensing round nearing, international companies are jostling for position.

Now that Schlumberger has increased its presence in China, analysts predict its peers may follow. Halliburton and China’s SPT Energy Group already have a strategic alliance to provide drilling services in China. While US-based Nabors Drilling already owns a 14% stake in local oilfield services firm Honghua Group.

Honghua’s chairman, Zhang Mi, recently said his group is in talks to form a joint venture with a leading foreign oil services company to provide shale-gas drilling services, without naming the potential partner. 

Despite having vast shale-gas resources, it is unlikely that China will be able to meet its soaring energy demand from domestic unconventional sources in the short-term, Zhou Jiping, president of China National Petroleum Corporation, said in June. 

Nevertheless, China is keen to start unconventional gas production. But first the country needs to improve its understanding of its shale basins, develop bespoke fracking technology and find a way to manage its water resources. The country’s most prospective acreage lies in regions prone to drought, and balancing the needs of agriculture, the local population and the shale-gas sector will be crucial.

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