Shell, CNPC Sign Shale Gas Production Deal

Royal Dutch Shell Plc. and PetroChina, a subsidiary of China National Petroleum Corp. (CNPC), have signed China’s first contract for the exploration, development, and production of shale gas.

The production sharing agreement (PSA) covers shale gas resources in the Fushun-Yongchuan block in the Sichuan basin.

Shell Chief Executive Officer Peter Voser hailed the agreement a new “milestone in our strategic cooperation with CNPC.  Voser added that  “China has huge shale gas potential, and we are committed to making a contribution in bringing that potential into reality.”

Shell and PetroChina began assessment work on the Fushun-Yongchuan block, an area approximating 3,500 square kilometers, in January 2010 following the signing of a joint assessment agreement for shale gas cooperation in Sichuan in November 2009.

The PSA marks the latest chapter in co-operation between the two companies.

Shell and PetroChina operate the Changbei tight gas field in the Ordos basin in China’s Shaanxi Province and have entered into an PSA for the development of tight gas reservoirs on the Jinqiu block east of Chengdu in central Sichuan Province.

In June 2011, the two parties also signed a Global Alliance Agreement to jointly pursue opportunities internationally and in China.