TPT July 2014

Global Marketplace

US shale gas plays, the [reserves] of the Sichuan and Tarim basins are potentially enormous and, if successful, could rival the Marcellus in terms of absolute scale.” › The reference is, of course, to the Marcellus shale gas formation that stretches across West Virginia, Ohio, Maryland, Pennsylvania, New York, and into Canada. Probably the second-largest natural gas find in the world, the formation has a total area of around 95,000 square miles and ranges in depth from 4,000 to 8,000 feet. It is estimated to contain more than 410 trillion cubic feet of natural gas – enough to supply the energy needs of US consumers for hundreds of years. Ambitious Australian LNG producers ratchet up pressure for labour reforms that would enhance their competitiveness The government of Prime Minister Tony Abbott of Australia has a two-year window to reform the nation’s industrial relations system or risk forfeit of A$180 billion in projects and 150,000 new jobs by 2030, the Australian Petroleum Production and Exploration Association (APPEA) says. The non-profit industry group represents companies which explore and produce oil and gas in Australia. As reported by James Massola – a political correspondent in the Canberra bureau of the Sydney Morning Herald , who travelled to Western Australia as guest of the APPEA – there are seven major liquefied natural gas (LNG) projects worth about A$200 billion under construction in Australia. But the APPEA says the future of the next A$180 billion wave of projects hinges on cutting project costs, reducing union power, and promoting flexibility. APPEA chief executive David Byers told the Herald that Australia was on track to overtake Qatar as the largest LNG exporter in the world in the next decade, but that its ability to capture that second wave of LNG investment was at serious risk from rising competition in the LNG marketplace. He said, “If we are able to remain globally competitive . . . we have to reduce the cost of doing business in this country.” (“Oil and Gas Industry Pushes Tony Abbott’s Government,” 6 April) Mr Byers said that the former Labour government’s Fair Work Act was a brake on productivity and had encouraged high costs and labour strikes in Australia. Among other demands, the APPEA wants the Abbott government to end testing for foreigners holding 457 visas (a sponsorship programme under which employers bring in skilled overseas workers for temporary jobs in Australia); to bar unions that are not party to a labour agreement from entering work sites; and to impose bigger fines for unlawful strikes. As noted by the Herald ’s Mr Massola, despite growing calls for more ambitious workplace reforms the Abbott government has taken a cautious approach, showing no inclination to go beyond its pre-election promises. These included a review of the Fair Work Act and the restoration of the Australian Building and Construction Commission – an independent

Oil and gas China’s potential in shale gas promises cleaner air and greater energy independence, but development has a long way to go Seeking to curb its reliance on coal and wean itself from dependence on energy imports, China has set goals of producing 6.5 billion cubic metres (m 3 ) of shale gas next year and 60 billion to 100 billion m 3 a year by 2020. Recently, Eric Yep of the Wall Street Journal reported that, in the view of energy executives, much remains to be done if these ambitious production targets are to be met. Here, condensed and lightly edited, are some highlights of Mr Yep’s “quick rundown” on the status of Chinese shale gas development. (“China’s Long Road to a Shale Gas Boom,” 26 March). › Only two players have made progress on the ground so far. Leading the pack is state-run China Petroleum & Chemical Corp, or Sinopec, which in late March said that its first commercial shale gas field – in the Fuling district of Chongqing – is running “ahead of schedule.” In second place is Royal Dutch Shell PLC, which has partnered with China National Petroleum Corporation. Shell is producing some tight gas in Changbei, Shaanxi province, and is implementing a drilling programme in the Sichuan basin, but trails Sinopec in drilling and production. › Fewer than 100 shale gas wells have been drilled in China, compared with around 40,000 wells in the US, whose shale gas boom China hopes to replicate. Sinopec is the only national Chinese oil company mandated to fast-track shale gas production. PetroChina remains focused elsewhere, with less than 1 per cent of its total budget devoted to shale gas drilling, according to energy consultants Wood Mackenzie (Edinburgh). › The availability of water is key to the hydraulic fracturing (“fracking”) drilling technique used to access natural gas trapped in shale rock formations. Newer fracking techniques have been able to reduce water consumption, but in several parts of China obtaining water for shale gas drilling will remain a challenge. › China’s recent decisions to boost private-sector participation and implement reforms are expected to help the shale gas industry, although much more needs to be done. According to a recent report from Eurasia Group, additional moves by the national oil companies to open the upstream and downstream to private capital will also expedite the timeline for shale production “even if the government remains unlikely to meet its highly ambitious 2015 and 2020 targets.” Despite the challenges, Mr Yep emphasised that – given the sheer size of the estimated reserves of shale gas in China – development remains a huge prospect for energy companies. He quoted New York-based Bernstein Research: “Relative to

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J uly 2014