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Shell Signs Natural-Gas Deal With CNPC

THE WALL STREET JOURNAL

Tuesday, March 23, 2010

By SHAI OSTER

BEIJING — China National Petroleum Corp. and Royal Dutch Shell PLC Tuesday announced plans to jointly develop and produce natural gas in China’s Sichuan basin, the Anglo-Dutch giant’s second gas venture in China.

In a statement, Shell said the companies have submitted a production sharing contract to the Chinese government for approval.

The agreement comes more than a year after Shell began discussing with CNPC a production sharing contract for the Jinqiu gas field. CNPC is China’s largest oil and gas company by output.

A person familiar with the matter said in April last year that securing CNPC’s blessing for the PSC for Jinqiu was a key motivation for Shell to discuss a possible joint bid with China’s biggest oil company for oil fields in Iraq.

Under the 30-year contract, Shell and CNPC would appraise and potentially develop tight gas reservoirs in an area of approximately 4,000 square kilometers in the Jinqiu block of central Sichuan Province, the statement said.

Tight gas is natural gas contained in rock that must be fractured or broken open before it can flow easily to production wells.

“This is another step forward for Shell’s worldwide tight gas strategy, building on our technology and production track record in China and elsewhere,” said Malcolm Brinded, executive director of Shell’s Upstream International division. “The agreement will strengthen our partnership with CNPC in developing cleaner energy to meet China’s growing needs.”

Shell already has a China gas project with CNPC, the state-owned parent of Hong Kong-listed PetroChina Co., in Changbei, in Shaanxi province.

Commercial production in Changbei began in March 2007, supplying three billion cubic meters of gas a year to Beijing and other cities in eastern China.

Shell also signed a joint assessment agreement with PetroChina in November 2009 for shale gas cooperation in Sichuan.

Assessment work tin in the Fushun block that covers another area of approximately 4,000 square kilometers started in January this year.

Write to Shai Oster at [email protected]

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