Shell signs with PetroChina

PetroChina and Shell recently announced that they are proceeding with the development of the Changbei natural gas field China.

PetroChina and Shell China Exploration and Production Company (Shell) recently announced that they are jointly proceeding with the development of the Changbei natural gas field in ShaanxiProvince and Inner Mongolia Autonomous Region, China.

Shell, which will be the operator of the project under a Production Sharing Contract with PetroChina, signed drilling contracts and Letters of Intent (LOI) last week for the award of Engineering, Procurement and Construction (EPC) contracts for the field development.

This marks the start of development of the field, which is expected to start delivering 1.5 billion cubic metres per annum (cm/pa) of natural gas to markets in Beijing, Shandong, Hebei and Tianjin by 2007, rising to 3 billion cm/pa by 2008. Shell will be entitled to about 50% of gas produced over the lifetime of the 20-year project.

Total development costs for the full lifecycle of the project will be about $600 million, covering the construction of the central processing facilities, inter-field pipelines and development drilling of about 50 horizontal and multilateral wells over 10 years.

The contract for the drilling rigs and associated services covering the drilling of about 30 wells over the next six years was awarded to the No. 1 Drilling Company of Liaohe Petroleum Exploration Bureau. A four-year directional drilling contract was awarded to Halliburton Energy Services (Tianjin) Ltd, while a three-year contract for drilling fluids and associated services was awarded to the Engineering Technology Institute of Changqing Petroleum Exploration Bureau.

A consortium comprising China Petroleum Engineering Company, Southwest Company and Sichuan Petroleum Engineering Construction Company signed an LOI for the EPC contract for the central gas processing facility. China Liaohe Petroleum Engineering signed an LOI for the EPC contract for the inter-field pipeline infrastructure.

A second Shaan-Jing pipeline for transporting the gas to Beijing is already being built by PetroChina and is scheduled to go into operation by the middle of this year.