China National Petroleum Corporation (CNPC) and Royal Dutch Shell plc (Shell) announced plans to jointly develop and produce natural gas in China’s Sichuan basin.

The companies have submitted a production sharing contract to the Chinese central government for approval. Under the 30-year contract, Shell and CNPC would appraise and potentially develop tight gas (basin-centred gas) reservoirs in an area of approximately 4,000-square-kilometre in the Jinqiu block of central Sichuan Province.

Tight gas is natural gas contained in rock that must be fractured or broken open before it can flow easily to production wells. “This is another step forward for Shell’s world-wide tight gas strategy, building on our technology and production track record in China and elsewhere,” said Malcolm Brinded, Executive Director of Upstream International. “The agreement will strengthen our partnership with CNPC in developing cleaner energy to meet China’s growing needs.”

Shell has onshore tight gas production in China, the United States and Canada, and appraisal activities in other regions. Tight gas reservoirs are also referred to as basin-centred gas reservoirs in parts of the world. Shell and PetroChina, a subsidiary of CNPC, already operate Changbei, another tight gas field in the Ordos Basin near Yulin in Shaanxi Province of China.  Commercial production in Changbei began in March 2007, supplying 3bcm natural gas a year to Beijing and other cities in eastern China.

Shell also signed a joint assessment agreement with PetroChina in November 2009 for shale gas cooperation in Sichuan.  Assessment work commenced in January 2010 in the Fushun block that covers another area of approximately 4,000km2.