Platts: Sinopec, PetroChina Persevere with Shale Gas as Drilling Costs Fall

China's top two state-owned companies PetroChina and Sinopec are pushing ahead with efforts to commercialize their dedicated shale gas projects in China, mainly because drilling costs have fallen.

Speaking last week at the company's annual results briefing, Sinopec Chairman Fu Chengyu said shale gas and unconventional gas will continue to be a strategic point of growth for the company, despite falling oil prices and a 12% cut in its capital budget to $22 billion.

This is primarily because gas prices are largely divorced from global oil prices.

"There is no one price in the world for natural gas. Natural gas is priced by location," he said, adding that in China, gas prices are at a healthy level and are able to sustain development.

Sinopec's main focus is on its Fuling shale gas project in southwestern Chongqing municipality.

The company said it has made progress in the first phase, with production capacity of 5 Bcm/year, while daily output of all its producing wells exceeded their design targets last year.

Production capacity is expected to reach 10 Bcm/year by 2017. Fuling gas is currently piped into the company's 8.5 Bcm/year Sichuan-Eastern China gas pipeline network, which also transports gas from its conventional Qingxi, Puguang and Yuanba fields to cities in the eastern region. MORE