Factbox: Domestic industry backs China's shale gas push

Honghua

21/06/2018 08:00

June 21 (Reuters) - China's fracking support industry has
grown rapidly over the past decade and now makes everything from
fracking trucks and pumps to proppants, while local service
providers are learning to match global rivals like Schlumberger
and Baker Hughes.  urn:newsml:reuters.com:*:nL3N1T83LX
    State majors Sinopec and CNPC produced 9 billion cubic
metres (bcm) of shale gas in 2017 from 600 wells, six percent of
the country's total gas output. Production is forecast to double
to 17 bcm in 2020, which will include production from another
700 wells, said consultancy Wood Mackenzie.  urn:newsml:reuters.com:*:nL3N1RT3TM
    China's shale gas reserves are buried deeper, more scattered
and in more mountainous terrain than in the United States,
making them more costly to develop, but domestic gas is a major
focus as the country looks to ease its reliance on dirtier coal.
    Reuters interviewed Chinese oil majors, local equipment and
service companies and global firms involved in China's fracking
industry to compile the following industry breakdown.
      
    TRUCKS
    Jingzhou-based Jianghan No.4 Machinery Plant, a unit of
Sinopec Oilfield Equipment Corp  000852.SZ , is China's leading
manufacturer of fracking equipment.
    The firm bought several dozen U.S. fracking trucks in 1988
on condition it be allowed access to the technology, and
clinched a similar technology transfer deal in the same year
with U.S. company SPM, acquired by the Weir Group in 2007, that
makes equipment designed for high-pressure fracturing and
handling fracking fluids.
    Jianghan benefited from hundreds of millions of yuan in
grants for special national technological projects to help
develop its fleet, a company official said.
    The company has built several hundred fracking trucks and
primarily supplies Sinopec, China's leading shale gas producer. 
    Baoshi Machinery Co Ltd, controlled by state energy group
CNPC, is also a major producer of fracking equipment. 
    
    PUMPS 
    Industry service provider Sichuan Honghua Petroleum
Equipment Co. Ltd, 30 percent controlled by state-run China
Aerospace Science & Industry Corp, began making eletric-powered
fracking pumps in 2015. It currently has 20 units under lease to
Sinopec and PetroChina.  
    Electric frackers, which have been adopted in the United
States by companies like Evolution Well Services and U.S. Well
Services, are smaller and quieter than diesel equipment and cut
fuel costs by half. 
    They are also more than twice as powerful as regular diesel
frackers, but require easy access to power grids. 
    While state-run firms focus on the domestic market,
independent firms Jereh Group  002353.SZ  and Honghua Group
 0196.HK  have been expanding sales of trucks and pumps to the
United States.
    SJS, a joint venture between Sinopec Oilfield Equipment and
U.S. Serva Group, makes bridge plugs, used to isolate zones in
shale drilling. Sinopec officials said the SJS plugs cost a
fraction of competing products.
            
    SERVICE PROVIDERS
    The oil price crash of 2014 forced Sinopec and CNPC to build
up internal teams as they cut down on foreign service providers
to slash drilling costs.
    CNPC's main services arms are Chuanqing Drilling and
Prospecting, Greatwall Drilling, Xibu Drilling, Bohai Drilling.
Sinopec operates six regional service providers such as
Jianghan, Zhongyuan and Shengli. 
    As drilling has picked up with a rebound in oil prices,
local independents such as Anton Oilfield Services  3337.HK ,
SPT Energy Group  1251.HK , Honghua International and Jereh
 002353.SZ  have returned, mostly as subcontractors to state
firms. 
    SPT said in May that it won a 428 million yuan ($68 million)
contract to drill 14 wells in Sichuan that includes drilling,
fracturing and test production. 
    Honghua separately agreed to drill four wells for 240
million yuan. Anton late last year won a 100 million yuan deal
to drill four shale wells in Sichuan for PetroChina. The deal
does not include equipment.
    "We're hoping to see freer competition among service
providers, rather than being just second options," said a top
executive with an independent service provider.  
        
($1 = 6.3401 Chinese yuan renminbi)

 (Reporting by Chen Aizhu; editing by Richard Pullin)
 ((aizhu.chen@thomsonreuters.com; +8610 66271211; Reuters
Messaging: aizhu.chen.reuters.com@reuters.net))