Total SA is preparing to sign an agreement, possibly within days, with a Chinese partner to explore for shale gas in the Asian country.
“We are in very advanced talks with a big Chinese company for shale gas,” Yves-Louis Darricarrere, head of exploration and production at Total, Europe’s third-biggest energy company, said yesterday in an interview. “I hope we can announce something very shortly.” Darricarrere declined to identify the partner.
An accord would follow a memorandum of understanding signed with China Petroleum & Chemical Corp., known as Sinopec, last year. Darricarrere described the nature of that deal at the time as being intended for “technical studies.”
Sinopec is a “natural choice” for a partnership with Total in China as the country seeks to emulate the U.S. shale boom, Gordon Kwan, the head of energy research at Mirae Asset Securities Ltd. in Hong Kong, said today in a phone interview.
“The geology is more complex in China, and it needs foreign technology,” he said. “China would welcome Total’s experience overseas to expedite development of what is estimated to be the world’s largest shale gas resources.”
Total can’t explore for shale gas in France because of a ban on hydraulic fracturing, the extraction method that’s raised the U.S. to the top spot in natural-gas output. A deal in China would come as the French company prepares to begin output at a tight gas field in Inner Mongolia called Sulige this year with China National Petroleum Corp.
Chinese interest in shale, a dense rock formation that holds oil and gas, comes as the nation seeks the technology to unlock its own reserves.
China holds 25.1 trillion cubic meters (886 trillion cubic feet) of exploitable shale reserves, the country’s Ministry of Land and Resources said last year. The U.S. Energy Information Administration has said China may hold 1,275 trillion cubic feet of technically recoverable gas, almost 50 percent more than the U.S.
Sinopec and ConocoPhillips (COP:US) signed an agreement for exploration, development and production of shale gas in a block in the Sichuan basin in southwest China, parent China Petrochemical Corp. said in an online newsletter in December. The deal followed a shale-gas production sharing contract signed in March between Royal Dutch Shell Plc and CNPC.
The Hague-based Shell may increase its planned annual spending of about $1 billion on unconventional gas projects in China, depending on exploration and test-well results and if Shell gets more acreage to drill, Chief Executive Officer Peter Voser said in Beijing in November.
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