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Major Shale Oil deal for Chinese firm

Major Shale Oil deal for Chinese firm

Chinese firm Sinopec has agreed a $2.2 billion deal with Devon Energy, giving it access to USA shale oil deposits.

The BBC has today reported the signing of a major deal by Sinopec to develop US shale oil deposits. Sinopec will get a 1/3 share in 5 projects with an anticipated 125 new wells expecting to come online.

Under the deal, Sinopec will pay $900m in cash with the remainder of the payment being made by 2014. This joint venture will give China the necessary experience to develop it's own shale oil deposits, which are estimated to be in the region of 48 billion tonnes ( (20% of that thought to have been discovered by Israel at the valley of Elah, 20 kilometers from Jerusalem).

The oil shale industry was established in China already in 1920s. After decrease in the production, the industry started to increase and as of 2008; several companies are engage in the shale oil production or the oil shale-based power generation. After 2005, China became the largest shale oil producer in the world. At the end of 2006, the Fushun Shale Oil Plant was the largest oil shale plant in the world, consisting of seven retorting units with total of 140 Fushan type units ( above ground)  producing 180,000 tonnes of shale oil per annum. In 2005, the China National Oil Shale Association was established in Fushan.

The advantages of the 'Fushan' type of process are small investment and stable operation. The disadvantages are a high use of water in the process and also great quantaties of waste shale. Despite recent fears in the West about the harmful effects of 'fracking', it seems that there is no such reluctance to use this process in China.

China has started to use fracking of natural gas, in it's drive to reach an ambitious target of 80 billion cubic meters by 2020, towards the target of fulfilling 10% of energy needs by natural gas and 15% from renewable sources. Last year, China's Ministry of Land and Resouces Strategic Resource Centre Head, Zang Dawei said ' The government places high emphasis on developing shale gas and has actively been studying supporting policies'.

Todays recent announcement follows the visit of President Obama to China in 2009 when he and President Hu Jintao announced a new US China Shale Resource Initiiative to promote 'environmentaly sustainable' development of natural shale gas resources. Very litte research has yet emerged to pacify those who believe that fracking is harmful and needs to be conducted in a highly regulated environment to prevent ecological damage.


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The sniveling nyraayess say the good times in the gas fields cannot last.They were right. Shale gas was a huge loser for most investors and lenders because it destroyed capital. Actually, prices are not that low, and may go lower.They are much lower than what the producers need to break even. Even if prices doubled most shale producers would still go out of business.Sure, there will be shake-out, but all over the world natural gas is abundant and cheap.That is not true. Natural gas is much more expensive in most of the developed countries. It is cheap in producer nations that have an abundance of conventional supply but after you move it to where it is needed the cost rises far higher than current American prices. Man will only get better and better at extracting it, lowering costs.No. The cheap gas has already been produced at a very low cost. Shale gas is not cheap and marginal shale formations, which make up more than 95% of all shale formations, will not be economic because the energy return is negative. People forget oil also would be abundant, save of the unlucky constellation of thug nations that control the bulk of the world's crude, such as Venezuela, Mexico, Saudi Arabia, Russia, Iraq, Iran, Libya, Nigeria etc etc etc. No contract law, no property law, no free enterprise and massive corruption--P.U. to the whole lot.First of all, OPEC followed the same rules as the Texas Railroad Commission. Those rules were designed to keep prices under control as long as there was spare capacity. Second, there is no more spare capacity left. This means that volatility will increase substantially. Third, when the US places an embargo on Iranian oil it is in no position to whine about rising oil costs. When it funds al Qaeda rebels in Libya and occupies Iraq it should not be surprised if oil production is affected or that discontent spreads in other producing nations. I also would not call the US as a good example of contract law, property law, or free enterprise.

Well, I can assure you that I know of seevral folks at EPA who read your blog and TOD. Don't know if any of the others are in a position of more influence. :-)We have, however, pointed out peak oil as a topic to pay attention to, and I noticed something recently that suggested other people, higher up, are aware of the topic. It might be part of the internal push for higher CAFE standards; don't know.

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