2010-11-11 10:18

BEIJING - PetroChina Co and Royal Dutch Shell have agreed to jointly work on an oil and gas project in Canada and a coalbed methane block in North China, the Chinese company said on Wednesday.

The two oil giants signed a Memorandum of Understanding for the project in Canada. The two companies also signed an agreement to jointly evaluate coalbed methane reserves in the Daning block of Erdos Basin in north China, PetroChina said on its website.

Both PetroChina and Shell declined to give further details on the agreements on Wednesday.

It is natural for PetroChina to team up with an international oil giant to work on the project in Canada, analysts said.

"Compared with international oil giants, Chinese companies still lack experience in operating overseas projects. Such cooperation will help PetroChina reduce risks in overseas businesses," said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University.

The leading Chinese oil and gas producer and the Anglo-Dutch oil major took over Australia's Arrow Energy in a $3.05 billion joint bid this year.

The coalbed methane agreement is in line with China's move to use more unconventional gas in its energy consumption, Lin said.

Development of coalbed methane will see accelerated growth in the next few years and the market will attract a growing number of overseas companies, he said.

China's coalbed methane production is expected to hit 23 billion cubic meters (cu m) in 2020, which will account for 0.7 percent of its energy mix, Zhang Hongtao, chief engineer at the Ministry of Land and Resources, said in October.

The country's production of coalbed methane now stands at 1 billion cu m annually.

As foreign companies have more advanced technology in the area of unconventional gas, it is beneficial for domestic companies to cooperate with them, Xiamen University's Lin said.

Shell said earlier this year that it agreed to work with PetroChina parent China National Petroleum Corp (CNPC) on a tight-gas reservoir in China's Sichuan Basin.

The two companies have submitted a production-sharing contract to the Chinese government for approval. Under the 30-year contract, CNPC and Shell will appraise and develop tight-gas reservoirs in an area about 4,000-square-kilometers large in the Jinqiu block of central Sichuan province, the company said.

Tight gas, an unconventional gas, is natural gas contained in rock that must be fractured or broken open before it can flow easily to production wells.