UK-based BP started drilling work last week on the first well at the Neijiang-Dazu shale gas block in China’s southwestern province of Sichuan.
The Wei 206H1 well forms part of the IOC’s work commitment under its PSC with state-owned China National Petroleum Corp. (CNPC), which was signed in March 2016. The PSC stipulates that CNPC will operate the 1,500-square km Neijiang-Dazu block, while BP will cover drilling costs. If exploration work leads to a commercial discovery, then CNPC has the right to back into a 51% interest.
Wei 206H1 will be drilled to a depth of 4,790 metres, according to a CNPC company newsletter, with drilling operations being handled by subsidiary Chuanqing Drilling and Exploration.
It is not clear whether BP has commissioned any seismic acquisition at the block, but industry sources have said they believe the US’ ConocoPhillips carried out seismic work prior to relinquishing the block in 2015. They added that BP would drill more wells at the block during the PSC’s exploration period.
CNPC offered Neijiang-Dazu to BP after the two companies signed a framework agreement during Chinese President Xi Jinping’s state visit to the UK in 2015. The block is one of two shale gas PSCs BP has in Sichuan.
Drilling at the 1,000-square km Rong Chang Bei block will start either late this year or in early 2018. BP and CNPC signed the PSC for Rong Chang Bei in September 2016.
BP is the only foreign company still involved in China’s shale sector, after developers including Royal Dutch Shell, Chevron and Hess quit the scene. They had been exploring more than a dozen unconventional blocks in southwestern Chinese basins, including Sichuan, but complex geology, mountainous terrain and lack of commercially viable finds drove them all to move on.
China has set a shale gas production target of 30 bcm per year by 2020 and 80-100 bcm in 2030, and wants the Sichuan Basin to play a key role in achieving this goal.
The basin is home to the country’s largest commercial production site, the Sinopec-run Fuling development. Fuling lies within the boundaries of Chongqing, where municipal authorities have set a 2020 production target of 20 bcm – to be achieved through 150 billion yuan (US$22.93 billion) worth of investment.