Royal Dutch Shell plc (NYSE: RDS-A) has found shale gas in two vertical wells in China that were drilled in conjunction with Shell’s partner, Petrochina Co. Ltd. (NYSE: PTR), a unit of China National Petroleum Corp. This is the first discovery of shale gas in China and could throw a monkey wrench into gas producers’ plans to develop an export market for gas in the world’s largest country.
The discovery was revealed by a Petrochina spokesman on the sidelines of the World Petroleum Congress currently being held in Qatar. Shell has not yet confirmed the find.
News of the discovery could have a chilling effect on plans by some US producers to export natural gas as LNG to China. The explosion of shale gas drilling in the US had lifted hopes for exports of LNG to raise prices for natural gas, which have been pushed down to around $3.50/thousand cubic feet in the US due to the vast amounts of gas now available through hydraulic fracturing and horizontal drilling. Cheniere Energy Inc. (AMEX: LNG) recently received approval to construct an LNG export plant at its Sabine Pass facility, and has signed a contract to export LNG to Spain beginning in 2017.
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