Gerson Lehrman Group
March 24, 2010
Analysis by: Hans Linhardt
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
Summary
Shai Oster reported today in WSJ (B2) that China National Petroleum is ready to jointly develop with Shell unconventional sources of natural gas in China, thereby copying the advanced technologies for unconventional gas developments in the U.S.
Analysis
Shell has found Russia to be a rough territory to develop natural gas resources for LNG export and/or commercial appreciation. It turns out China has learned their lesson from the Unocal takeover attempt without an IOC partner. Now China’s energy sector is a much more sophisticated global energy resources player than the bullying Gazprom operation of Russia, inviting Shell to be a partner even for their own tight gas and potential shale gas resources, to be equal in geology to the the U.S. and of enormous interest to China to avoid any significant dependance on Gazprom of Russia. Significant developments are:
- China National Petroleum Company (“CNP”) announced plans to jointly develop with Shell natural gas in the western Sichuan basin
- A 30 year contract has been signed to develop unconventional gas (tight gas and shale gas) in an area of about 4,000 square kilometers in the Jinqiu block of central Sichuan province
- Second deal of CNPC and Shell is the joint buyout of Arrow Energy, Ltd. of Australia for $3.15 billion to acquire their coal seam gas resources and plan export of LNG to China
In summary, Shell has found a sophisticated and energy hungry partner in China that plays a fair game and will advance their own energy demands with support and eventual assimilation of advanced IOC technologies for unconventional gas and – of course – LNG.
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