China Petrochemical forms JVs to target shale gas reserves in China

16-Jun-14

China Petrochemical Corp has formed two joint ventures with drilling technology firms - Switzerland's Weatherford International and FTS International of the United States, in the past month. The Oil and gas giant hopes that this alliance could pave the way for technology transfers that would help unlock the mainland's vast untapped shale gas resources, as per South China Morning Post. Analysts said China Petrochemical's drilling services ventures would also boost the image of Sinopec Oilfield Service, a unit of subsidiary China Petroleum & Chemical Corp (Sinopec), which it hopes to spin off for a listing. FTSI said last week it had agreed to form a 15-year joint venture with China Petrochemical that would see the mainland benefit from FTSI's expertise in fracturing underground rock formations to release hard-to-extract oil and gas. FTSI chief executive Greg Lanham said the joint venture would initially invest US$55-70 mln on facilities to serve Sinopec's shale gas projects in Sichuan province. Other gas drillers on the mainland could also become customers of the venture later. The venture will be 55% owned by China Petrochemical and 45% by FTSI. Equipment manufacturing would initially be conducted entirely in the US, but some work might migrate to China over a three to four-year horizon to reap potential savings. The venture planned to provide fracturing services for two to six wells a month for Sinopec at first, and its initial annual work volume was projected at US$50 mln. News of the FTSI venture came three weeks after Weatherford said it had agreed to form a joint venture with Sinopec Oilfield to provide products and services to tap the mainland's shale gas resources, estimated by the US Energy Information Administration to be the world's largest.