Shell and China National Petroleum sign gas deal

ROYAL Dutch Shell and China National Petroleum Corp have signed a 30-year deal to develop natural gas in China, a day after launching a joint takeover bid for Australian gas producer Arrow Energy.

The two firms will jointly develop tight gas deposits in the 4,000 square kilometre Jinqiu block in central Sichuan province, Shell said yesterday. It is the second major gas production contract the Anglo-Dutch company has clinched in China.

An industry official familiar with the project said the block would likely produce 2-3bn cubic metres (bcm) of gas a year, with Shell taking a larger share in the contract for undertaking all the exploration risks.

The deal to tap tight gas, contained in rock that must be broken before it can flow easily to production wells, is the latest example of an oil major seeking out previously uneconomic deposits. Analysts said the deal was part of a broader CNPC/ Shell alliance.