China National Petroleum Corp (CNPC) and Royal Dutch Shell (RDSA.LSE, RDS.A.NYSE) have agreed to jointly develop a natural gas project in Sichuan province over a period of 30 years, Reuters reported. The gas deposits in the 4,000 square-kilometer Jinqiu block are expected to produce 2-3 billion cubic meters of gas a year, with Shell taking the larger share as it is undertaking all the exploration risks. The deposits are termed tight gas, as they are contained in rock that must be broken before it can flow easily into production wells. China’s gas consumption is likely to triple to about 300 billion cubic meters per year by 2020, equivalent to nearly 10% of the country’s energy needs. Shell is involved in another Chinese tight gas project – in the Ordos Basin in northern Shaanxi province – which started three years ago and now produces 3 billion cubic meters of gas per year. Earlier this week, the Anglo-Dutch company announced a joint takeover bid with PetroChina (0857.HK, 601857.SH, PTR.NYSE), a listed unit of CNPC, for Australian gas producer Arrow Energy.
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