China’s largest coal company to learn shale in US deal

HOUSTON – China’s state-owned coal behemoth is heading to Pennsylvania to learn how to tap into natural gas embedded in shale.

China Shenhua Energy Co., the world’s second largest coal company, is planning to create a joint venture between a U.S. subsidiary and a private Pennsylvania natural gas producer to drill 25 natural gas wells in the Marcellus Shale.

The $146 million project — which is slated to produce 3.8 billion cubic meters of gas in three decades — is China Shenhua’s first foreign venture into shale gas, according to China Daily.

China Shenhua said it aims to learn the trade and bring it back to China, where Chinese officials have set a goal to produce 80 billion cubic meters of gas by 2020. However, analysts peg China’s potential gas production at 18 billion cubic meters by that time.

U.S. liquefied natural gas companies are counting on the country to be a big importer in coming years, as China tries to increase the amount of power it generates from natural gas.

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U.S. producer Energy Corp. of America said China Shenhua is putting up an initial $90 million toward the shale project in Greene County, the company’s chief executive John Mork said in a statement Thursday. Energy Corp. is headquartered in Denver and has offices in Sugar Land, Texas.

Though the deal involves one of the largest coal miners in the world, it’s a drop in the bucket compared to some Chinese investments in shale oil and gas, like Sinochem’s $1.7 billion joint venture with Pioneer Natural Resources in West Texas.

Foreign companies have pumped $26 billion into U.S. shale efforts since 2008, according to the U.S. Energy Information Agency. But China Shenhua’s deal comes at a time of relative quiet on the international front. Foreign acquisitions in the U.S. oil and gas business have declined since they peaked in 2011, as operators from China and elsewhere finance drilling operations on the assets they have already acquired.

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