China's oil corp invests in shale gas and coal-to-gas

The nation's major oil giants are now competing to harvest unconventional gas.

The unconventional fuel deposits located in bands of rock stretching from the US, Australia and China's Xinjiang, Shanxi, and Inner Mongolia, represent what may be the biggest energy bonanza in decades which is shaking up the global energy markets. Dozens of global energy companies, including China's major oil producers like Petrochina, Sinopec, and China National Offshore Oil Corp (CNOOC) are rushing to drill to unlock the treasure the earth has guarded for hundreds of millions of years.

As China's largest offshore oil developer, CNOOC recently bet billions of dollars on synthetic natural gas (SNG) development in North China's Shanxi province.

The investment was a significant step towards developing its inland business, a CNOOC head told a domestic energy forum last month.

At the China (Taiyuan) International Energy Industry Expo last month, CNOOC Group, parent of CNOOC Ltd signed an agreement with the Shanxi provincial government to jointly develop coal-to-gas or SNG in the region.

General Manager Fu Chengyu said CNOOC Group would invest more than 40 billion yuan in a clean coal utilization project in Shanxi over the next five years.

Under the agreement, the company will invest 50 to 100 billion yuan to build a coal gasification project with annual capacity of 10 billion cubic meters natural gas. CNOOC will partner with Datong Coalmine Group, the largest mining company in Shanxi province for first phrase construction.

The company estimates that the project will garner 18 billion yuan in annual sales revenue and 4 billion yuan in profits and taxes, a senior official surnamed Liu with CNOOC New Energy Investment Co Ltd, a subsidiary that executes this investment told China Daily yesterday.