Monday, March 21, 2011

Shell to spend $5 billion over 5 years on China shale gas. Unconventional gas fever spreads across US, Europe and now in China…

Shell aims to spend $1 billion a year on shale gas in China over the next five years if its exploration work currently underway proves to be a success. "It’s too early to say that shale gas is game changer in China but I have great expectations. We are drilling 17 wells this year in regions such as southwestern Sichuan province. That will give us a sense of magnitude of what's available here," said Shell chief executive, Peter Voser. China does not have any shale gas production yet, but has a rough target to pump some 10% of its total gas output from shale gas by 2020. "If we are successful, we are aiming to spend $1 billion a year over the next five years on shale gas," Voser said, adding that Shell was already spending $400 million on unconventional gas in China this year.

Chinese shale gas exploitation speeds up!!
China will start the bidding for eight shale gas blocks located in Guizhou, Chongqing, Anhui and Zhejiang in this year, and each block covers an area of 6,000-7,000 sq km, according to Zhang Dawei, deputy director of the Oil and Gas Resources Strategy Research Centre under the Ministry of Land and Resource (MOLR). According to MOLR’s Oil & Gas Research Centre, China is aiming to increase its shale gas reserves to 1 trillion cubic metres by 2020. The government is also expected to introduce new policies to encourage shale gas exploration, including the reduction or exemption of royalties and import tariffs and value added tax for the import of key equipment needed for shale gas exploration, according to Zhang.
Zhang has revealed that more companies, such as Sinochem Group, Xinjiang Guanghui Group and Zhenhua Oil Co Ltd, that have experiences in overseas petroleum and gas exploration are added in the bidders list. The participation of these private companies will break up the monopoly of state-owned enterprises like PetroChina, Sinopec, CNPC and Shaanxi Yanchang Petroleum in this market.


Shell’s presence in China is marked by these transactions


Just a year ago, Shell and CNPC signed a 30-year deal to develop another tight gas block Jinqiu in Sichuan province. Shell recently started drilling two shale gas exploration wells in Fushun Block in Sichuan province. ConocoPhillips will soon finalise terms with PetroChina for a shale gas production sharing contract for a block close to Statoil’s acreage. Also, Sinopec is in talks with BP and Chevron about potential co-operation. Not only the local private companies are interested in exploiting these Chinese shales, but also industry majors like ConocoPhillips, Statoil, etc.,

Eagle Ford oil production to ramp up in 2011. Eagle Ford opportunities worth $3 billion are up for grab



Significant increase in deal activity

Activity in Eagle Ford has stepped up with more than $4 billion worth of assets on the market. Operators are looking to tie up with partners to develop the oil window, as the returns on investment expected from oil window is higher compared to gas window.  


Heading
Type
Value Range ($m)
SM Energy considers options for Eagle Ford acreage
Property
$500 - $1,000
El Paso seeks JV partner for Eagle Ford acreage
JV
$100 - $500
ConocoPhillips offers Eagle Ford/Austin Chalk acreage
Acreage
$100 - $500
Forest Oil seeks JV partner for  Eagle Ford acreage
JV
$100 - $500
Stonegate and TriTech offer Eagle Ford acreage
Acreage
$100 - $500
EOG Resources to sell certain Eagle Ford Shale acreage
Acreage
$100 - $500
Buffco Production seeks partner for Eagle Ford acreage
Acreage
$100 - $500
U.S. Enercorp and partners offer Eagle Ford acreage
Acreage
$25 - $100
Sanchez Oil & Gas offers Eagle Ford acreage
Acreage
$25 - $100
Petro-Hunt to divest Eagle Ford acreage
Acreage
$25 - $100
BlueStone Natural Resources offers Eagle Ford acreage
Acreage
$25 - $100
BTE Energy offers Eagle Ford acreage
Acreage
$25 - $100
Caiman Ranch offers Eagle Ford acreage
Acreage
$25 - $100
Denali Oil & Gas considers sale of certain Eagle Ford assets
Acreage
$25 - $100
Newfield Exploration to sell certain Eagle Ford assets
Property
$25 - $100
Texas HBP to sell certain Eagle Ford acreage
Acreage
$25 - $100
Touchwood Resources to divest 12.5% ORRI in Eagle Ford
Royalty
$10 - $25
Westover Energy offers Eagle Ford oil window acreage
Acreage
$10 - $25
SMSE offers Eagle Ford oil window acreage
Acreage
$10 - $25
Don Poe & Associates offers Eagle Ford acreage
Acreage
$10 - $25
Vander Ploeg offers Eagle Ford and Pearsall acreage
Acreage
$10 - $25
Bald Eagle Land offers Eagle Ford oil window acreage
Acreage
$1 - $5


Significant increase in the rig count in the region


Last year, U.S. operators expressed their intentions to step up drilling programs in the Eagle Ford Shale formation. Strong oil prices and favorable well economics, due to greater concentrations of natural gas liquids, made drilling in this part of Texas appealing. True to their word, the rig count in the Eagle Ford has nearly doubled to 154 rigs, versus 82 reported in March 2010.

EOG is the largest oil producer in the Eagle Ford at 23MM bopd and currently controls 595,000 net acres across the region. After drilling 96 net wells in 2010, EOG has plans for 250 net wells in 2011. Chesapeake Energy currently has the most active rigs in the region at 17 rigs where it holds 445,000 net acres through a partnership with CNOOC. In terms of concentration of resources, ConocoPhillips, with 14 rigs drilling across 254,000 acres held, has approximately half of its currently active U.S. rig fleet operating in the region.

The five largest drilling fleets in the Eagle Ford control 68% of the market.











Shift from gas to oil window
The shift occurring between drilling for natural gas or oil continues to move away from the natural gas. A year ago, the split was 91% gas and 9% oil rigs in the Eagle Ford. Today, the mix is 60% gas and 40% oil.
Operators in the region are responding to the huge return on investment gap that exists between drilling oil wells today versus drilling natural gas wells .On drilling a natural gas well operator gets around $4 per unit of production vis vi drill an oil well and receive around $15 per unit of production.

Drilling plans for the Eagle Ford operators
EOG Resources commented that the Eagle Ford would be the firm's largest component of year over year oil growth during 2011. EOG also expects that its well costs in the region were anticipated to fall from current levels of $6 million per well to approximately $5 million in 2012 due to frac optimization techniques.

ConocoPhillips has very aggressive development programs going on in the Eagle Ford where they plan to drill probably 140 to 150 wells this year.

Nexen reveals 2011 Corporate Strategy; Projected 7% production growth in 2011; Stick to three primary growth strategies – conventional offshore, oil sands and shale gas

Nexen prioritizes its 2011 activities that include a continued ramp up of Long Lake, completing the development of Usan discovery with first oil production in 2012, sanctioning discoveries, proceeding with the development of Horn River shale gas lands, securing a contract extension in Yemen and continuing with the implementation of the exciting global exploration program.

The company expects 2011 production volumes to range between 230–270 kboepd, before royalties and capital expenditure budget ranges between $2.4–2.7 billion.


Nexen’s diversified portfolio of exploration and production (E&P) assets provides the company with a multi-year inventory of development projects and a positive long-term production growth profile. It plans to deploy nearly 25% of total 2011 capital budget for the E&P program.


Nexen is primarily focused in the North Sea, deepwater Gulf of Mexico & offshore West Africa. The company projected 7% production growth in 2011.




Recently, Nexen initiated a process to seek a joint venture partner for various portions of the company’s northeast British Columbia shale gas acreage.


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