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Royal Dutch Shell Plc .com: Shell gives plan to PetroChina for large gas field in southwest China

Jul 5, 2006

BEIJING (MarketWatch) — Royal Dutch Shell PLC (RDSB.LN) has submitted a development plan to PetroChina Co. (PTR) to help secure production in the largest gas field in southwestern China, said a source close to the companies. The Luojiazhai gas field in Sichuan province is PetroChina’s largest gas field in southwest with 58 billion cubic meters of proven reserves, the source said.

If PetroChina accepts Shell’s development plan, Shell may win a production-sharing contract on another nearby smaller gas field called Dukouhe, which has 28 billion cubic meters of proven gas reserves, the source added.

PetroChina will invest CNY16 billion ($2 billion) over the next five years to accelerate the gas development in Sichuan, the largest gas-producing region in China.

“Shell submitted the study report to PetroChina at the end of last week,” the source said Sunday. “It’s very rare that PetroChina can share production in (the Dukouhe) gas-rich field.”

An official from PetroChina’s Southwest Oil and Gas Field branch – the operator of the gas field – confirmed Shell’s involvement in the study Tuesday, but didn’t disclose the contents of the plan.

Shell declined to comment on the matter.

Luojiazhai is known for its harsh, mountainous terrain and PetroChina has limited technology to ensure safe gas production.

Several serious production accidents occurred there in the past few years. In December 2003, a massive blowout occurred at a Luojiazhai gas well, resulting in the leakage of hydrogen sulfide and killing 243 and injuring more than 2,000 nearby residents and workers.

PetroChina expects to start production at Luojiazhai at the end of this year. When the field comes onstream, daily gas output is estimated to reach 9 million cubic meters.

Currently, PetroChina is building a gas purification facility in Luojiazhai with designed annual processing capacity of 9 million cubic meters, with construction expected to be completed by the end of the year, according to a report Wednesday by the China Oil News.

It is also building another gas purification facility in Dukouhe with the same processing capacity, with construction expected to be completed by the end of 2009.

A third gas purification facility at the Tieshanpo field, also in Sichuan, is under construction with an annual capacity of 6 million cubic meters, and is expected to be onstream by June 2008.

-Edited by Jarrett Banks
-Contact: 201-938-5400 


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