Drilling contract cost exposes shale gas storage risk

Recently, Honghua Group announced that it has completed its first domestic shale gas drilling service project with a total contract value of approximately 17.3 million yuan.

“This is the first time in China to disclose information about the cost of shale gas mining. Although it is incomplete, it is estimated that only one drilling cost, China is much higher than North America, and poured a cold water into the shale gas investment boom. "On December 16, there were people from Sinopec headquarters.

Honghua Group is a well-known oil rig manufacturer in China. This time it is subcontracted for Schlumberger Changhe Oilfield Engineering Co., Ltd. (referred to as Changhe Oilfield), and Changhe Oilfield Project is a port of PetroChina located in Yibin, Sichuan. Engineering general contractor for shale gas wells.

A multinational investment bank analyst said: "General drilling costs will account for 20%-30% of the total project cost. Therefore, it is estimated that the total cost of a single well in Changhe Oilfield will reach 50 million to 80 million yuan." The daily production of shale gas wells is 20,000-30,000 cubic meters. The owner of PetroChina will face huge losses. This may be one of the reasons why many companies that have obtained shale gas blocks are reluctant to start construction.

It is understood that among the 19 blocks in the second round of shale gas block bidding of the Ministry of Land and Resources, only Huadian Group plans to start the drilling of the first shale gas vertical well in the shale gas block in Puyang, Guizhou. Its project budget is about 40 million yuan.

“Changhe Oilfield and the owners have put forward the requirements for rescuing the impact. Honghua can no longer say anything about this project.” For the interview request made by the reporter, the relevant person in charge of Honghua Group said this.

Honghua reveals the secret

It is reported that the project of Honghua's operation is located in Yibin, Sichuan. The project owner should be Sichuan Changning Natural Gas Co., Ltd. (referred to as Sichuan Changning), which is a shale gas development entity newly established by PetroChina and Sichuan local government.

“Honghua provides services such as drilling and oil-based mud for Changhe Oilfield, and cooperates with cementing and completion services, as well as self-made tools such as personnel and top drive for drilling construction. The total contract value is 17.3 million yuan.” The Honghua Group’s public documents stated.

After 90 days of hard work, Honghua successfully overcome the limitations of multiple complex geological conditions and successfully completed the drill. “The drilling depth is 4115 meters, which is 155 meters deeper than the designed well depth of 3960 meters.”

Since the bidding for the first round of shale gas in the land in 2011, the concept of shale gas has become a hot spot for repeated speculation in the capital market. Jereh shares and other related stocks have even risen more than 100%.

However, Sinopec and PetroChina, which have successfully implemented shale gas production, and Huadian Group, which has obtained shale gas blocks, have not disclosed relevant cost data for shale gas exploration and mining.

Therefore, the data disclosed by Honghua Group has become an extremely important first-hand information in the eyes of many investment institutions. "According to current data, once it is officially put into production, Sichuan Changning is likely to face huge investment risks," said the multinational investment bank.

At present, the shale gas wells that have been put into operation in Yibin area are mostly 20,000-30,000 cubic meters of natural gas. The price of local natural gas gate station is 2.143 yuan/m3, and the shale gas mining can obtain 0.4 yuan/m3 of government financial subsidies. The gross income of the first year of the well should be between 18 million and 27 million yuan,” estimated Wang Ruiqi, an analyst at Xiwang Energy.

Due to the extremely high rate of shale gas mining, the output will be reduced by 70% in the second year after mining, and then gradually decline to 10% of the first year of mining. “So this well cannot recover the cost significantly in the first year. Then there will be huge losses," said the above-mentioned multinational investment bank analyst.

Although the first well has the nature of the test, the cost of the subsequent drilling of the gas well drilling project will gradually decline, but "at the current price, it is still difficult to escape the risk of loss."

Since the bidding of the shale gas of the Ministry of Land and Resources in 2011, although there are many bidders, only the number of successful bidders, such as Sinopec, Henan CBM and Huadian Group, have established a project investment plan. The other successful bidders are waiting to see.

Regarding the above-mentioned statements about investment risks in the industry, China Petroleum and other relevant parties have not responded.

The warning line is 70,000 cubic meters / day?

As we all know, the reason why a large number of private enterprises flocked to participate in the shale gas bidding of the Ministry of Land and Resources is because of the radiation effect of the US shale gas revolution. However, what many people do not understand is that the geological environment and technical level between China and the United States are too different.

Xi Chuanxue, deputy chief engineer of Sinopec Jianghan Oilfield, once said that from the topography, the entire Sichuan Basin is basically a mountain, and the United States and Canada are all beaches of Pingchuan, so the early investment in the United States is much lower than that of China - a well in the United States. The depth is around 900 meters.

In addition, since the development of shale gas in China is still in its infancy, the average cost of use is much lower than that of many current projects, regardless of drilling and cementing, or the corresponding technical equipment.

Even so, after 2011, multinational oil companies such as Shell began to withdraw from the US shale gas development market and turned to the development of shale oil. A senior executive of a multinational oil company in China said frankly: "Because the gas price is too low, the profit return of the project has not been able to achieve the expected goal."

At that time, the information of Xiwang Energy showed that on September 1, 2011, the price of the natural gas market in New York was only 4.4 US dollars per million British thermal units, and it fell to 4.25 yuan per million British thermal units on the 2nd (only equivalent to 1.12 yuan / cubic meter). And 1.08 yuan / cubic meter); and in the weak consumption of Eco (a natural gas distribution center in the United States, its price is representative in the United States), the gas price is only 3.73 US dollars / million British thermal units and 3.64 US dollars / million British thermal units (0.95 yuan / cubic meter and 0.93 yuan / cubic meter).

With the withdrawal of a large number of investors, the price of gas in New York has begun to rise slowly. However, its gas price is still far lower than the price of city gates in Shanghai and other places in China.

In fact, "China is not a shale gas project that does not have the conditions to engage in big scenes, but the premise is whether the block production can meet the break-even situation." The above-mentioned Sinopec people believe that "70,000 cubic meters per day should be a profit and loss warning line. Like the Da'anzhai project."

It is understood that the Daanzhai shale gas project is the first shale gas project of Sinopec, which is located in the Fuling boundary of the Sichuan-Yunnan border. At the end of 2012, the project was officially put into operation. On the first day, the gas was tested in the Da'anzhai section of the Xinglong 101 well. The daily gas production was 110,000 cubic meters and the daily oil production was 54 cubic meters.

The output of 110,000 cubic meters per day is equivalent to a maximum annual output of 40 million cubic meters. At a sales price of about 2.5 yuan / cubic meter, the annual sales income can reach 100 million yuan.

However, Xi Chuanxue, who is in charge of the project, said that because the well site is a narrow mountain road and the terrain is steep, it brings great difficulties to material transportation; and the well site is very close to the farmer's house, and it is impossible to use explosives to open the mountain construction site. Working on mechanical equipment has had a great impact on the construction schedule; even more difficult is that due to the complexity of the geological conditions, the formation is quite hard, the depth of drilling wells is only 50-60 meters per day, and the Drill Bit is 2 - You need to replace one in 3 days.

“The private enterprises are investing in shale gas, I think it still needs to be cautious.” The above-mentioned multinational oil company executives finally said.

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