Royal Dutch Shell plans to spend at least $1 billion US a year exploiting China's potentially vast resources of shale gas, part of an aggressive strategy to expand in the world's biggest energy market.
In March, Shell secured China's first productsharing contract for shale gas, hoping that getting in early will allow it to be a big beneficiary from the sort of boom in shale that has transformed the U.S. energy market.
Asked if the firm remained committed to a plan to invest $1 billion a year in China's shale gas over the coming few years, Lim Haw Kuang, Shell's top China executive, replied: "Yes, yes and yes. If there has been an adjustment to that pledge, it could only be an upward revision."
China is estimated to hold the world's largest reserves of the unconventional gas, which can be unlocked from ancient shale rocks by "hydraulic fracturing," a technology well developed in recent years in North America.
Shell also plans to build a $12.6 billion refinery and petrochemical complex in eastern China, a project that could become the single largest foreign investment in China.
The Anglo-Dutch firm is one of the biggest investors in China's energy sector, but faces strong competition.
Exxon Mobil, BP, Total and Chevron Corp are also trying to get a bigger slice of the Chinese market, where use of natural gas is set to triple this decade and growth in oil demand makes up more than a third of the world total.
Shell has lined up China National Petroleum Corp (CNPC), the country's top energy group and parent of PetroChina, as its partner for both shale gas and the Taizhou refinery project.
"It's an alliance between strong firms. That should help control the cost," said Lim, referring to its shale gas venture with CNPC in Sichuan province, where Shell drilled 11 wells last year, more than any other international firm.
Shell hopes to leverage its operational and technology expertise gained developing shale gas in North America, while CNPC holds the country's premium oil and gas acreage.
CNPC, through PetroChina, produces about 60 per cent of China's crude oil and nearly threequarters of its natural gas.
Shell is a major supplier of liquefied natural gas (LNG) to China, securing gas from its global fields including in Australia and Qatar. LNG is super chilled gas for shipping in tankers.
Shell plans to move its global business unit for coal bed methane to China this year, and establish a global research centre for unconventional gas and oil, its first outside Houston, Texas.
China expects CBM, gas trapped in coal seams, to meet 15 per cent of the country's needs by 2020.
