Shale Gas Exploration Greatest Winner From Private Investment Drive
BMI View : CNPC's decision to open their doors to private sector investment offers significant opportunities to international oil companies. We see the biggest potential upside falling to the country's nascent shale gas sector, which will benefit from the wider involvement of experienced international majors.
China National Petroleum Corporation (CNPC) has announced plans to open six key sectors to private investment. According to CNPC chairman Zhou Jiping, the company will seek joint investments in unconventional oil and gas exploration, pipeline construction, refining and petrochemical complexes, overseas exploration and production and financial operations. What form these joint investments will take remains unclear, with CNPC indicating that shareholding structures will vary by project. The move is the latest indication of the government's desire to build a more open and competitive energy sector. Last month downstream behemoth Sinopec announced its decision to sell up to 30% of its oil retail unit, which comprises over 30,000 fuel stations, to private sector investors. The implications for China's oil and gas sector and potentially wide-ranging; however, in our view, CNPC's decision holds especial significance for the country's nascent shale gas sector.
China has become heavily dependent on imports to satisfy ballooning domestic energy demands. We estimate that in 2013 natural gas imports reached 47.83bn cubic metres (bcm), and forecast this to increase rapidly over the next 10 years, hitting 121.12bcm by 2023. In a bid to rein in their spiralling import dependency, the government is looking to develop the country's vast shale potential, which China's Ministry of Land and Resources estimates at around 25.1tn cubic metres (tcm).
|Consumption Outstrips Production|
|China Natural Gas Production and Consumption (bcm), 2013-2023|