On March 24^th, Sinopec announced that the company’s shale gas exploration and development had made a major breakthrough and that it would build the first shale gas field with a capacity of 10 billion m³ – Fuling Shale Gas Field.

This news boiled the market up. You know that before this, the shale gas development in China basically rested on exploration.

The shale gas development has found a slow progress in recent years, due to the factors such as complicated geographical structure, weak technology, scarce water resources, insufficient infrastructure, limited policy & system and uncertain investment profits. Since 2011, China has organized two rounds of exploration right bid inviting for shale gas. The progress, however, has been slower than expected.

According to the current geographic materials and productivity evaluation, Fuling Shale Gas Field, with the estimated 21 trillion m³ potential resource, shall be built into a shale gas field with an annual productivity of 10 billion m³, equal to a 10 million-ton large-scale oil field. It has been estimated that Fuling Shale Gas Field will have achieved an annual capacity of 1.8 billion m³ by the end of 2014 and 5 billion m³ by the end of 2015, which will be 10 times of that of the original plan.

The above two data are really astonishing, for just on the same day, Ministry of Land and Resources announced that China’s shale gas output in 2013 was 0.2 billion m³.

In addition, the 12^th five-year target for shale gas by the Energy Bureau is 6.5 billion m³, while the output of shale gas of Sinopec itself can be estimated 5 billion m^3.

FU Cheng-yu, Director of Sinopec, held that the target of the 12^th five-year plan by the Energy Bureau was a bit too conservative.

LI Li, Superintendent of ICIS Energy Study and Strategy Center, told the reporter from Securities Daily, “What Sinopec did has shored up confidence of private-owned capital who hesitated a lot before.”

LIU Yi-jun, Vice Director of the Research Center of Chinese Oil & Gas Development, told the reporter of the Securities Daily that the finding of the above field by Sinopec meant that shale gas would soon go from the stage of resource evaluation to the stage of development, providing possibility for mass development.

In LIU’s eyes, the key problem faced by Sinopec at present was whether the productivity of 1.8 billion m³ could be stable, whether the shale gas development would have existing capacity without national subsidies. He believed that shale gas development even with Sinopec as the leader still needed to explore a new mode for its mass commercialization.

Actually, as a major monopoly in the field of China’s natural gas, CNPC began to set foot in the field of shale gas in 2006, becoming the company with the earliest start in shale gas. On the contrary, natural gas has always been a weak spot of Sinopec. Therefore, Sinopec has long been hoping to surpass in the field of unconventional natural gas. At present, Sinopec was making constant efforts depending on such favorable blocks as Fuling, Jiaoshiba and Pengshui, yielding an eye-catching achievements. Last year, China’s shale gas output was 0.2 billion m³ while Sinopec yielded an output of 0.155 billion m³ and CNPC 40 million m³.

It has to be admitted that Sinopec is the so-called “latecomer” who surpasses the old-timer. However, CNPC never slacken its efforts in developing shale gas.

In February, CNPC’s basic scheme of pipeline transportation has taken an initial form for the key shale gas exploitation block -- Changning-Weiyuan Block and is to enter the accelerating stage. Currently, there are 9 wells in this block that have been put into pilot production, adding up to 80 million m³ of shale gas. Over 20 working platforms are to be built and over 110 new wells are to be spudded in. It is expected that another 8 new wells are going into production this year. As planned, by the end of April of this year, more than 10 platforms will have been spudded in. And by the end of July, all the platforms will have been spudded in.

An analyst told the Securities Daily, “CNPC is expected to start a commercialized and large-scale operation of shale gas.”

On March 19^th, YANG Qing-li, General Manager of the Engineering Technology Sub-Company, expressed at the 6^th International Petroleum Summit that CNPC was to enhance shale gas development to realize 2.6 billion m³ shale gas exploitation in the year of 2015.

An insider also said to Securities Daily that with increasing demand of the natural gas, as a country short of oil and gas, China would pay more and more attention to the development of shale gas, so shale gas development shall be the highlight of Sinopec and CNPC.