Huadian Group's shale gas layout

About the basic concepts and status of shale gas:

First, the basic concept of shale gas

Conventional gas reservoirs refer to the hydrocarbons in hydrocarbon source rocks (organic-rich shales) that have been excreted and transported to the gas pools formed by the permeability rock formations under the action of geological movements.

In contrast to conventional natural gas, shale gas is unconventional natural gas, which is naturally occurring in organic-rich dark shales and its interlayers in an adsorbed or free state. The organic-rich dark shale is not only source rock, but also reservoir and seal. The capping layer is a typical self-contained, large-area continuous accumulation gas reservoir. In layman's terms, conventional natural gas is stored at "points," and shale gas is stored at "face."

Other unconventional natural gas resources include: coalbed gas, tight sandstone gas, methane hydrate (flammable ice), biogas, and so on.

Unconventional natural gas resources are the resources that the country is gradually promoting to market development. The market prospects are broad.

Second, shale gas resources reserves

1. The global shale gas resources amount to 456 trillion square meters. Mainly stored in: North America about 108 trillion square; Central Asia and China about 100 trillion square; Middle East and North Africa about 72 trillion square; Latin America about 60 trillion square. In terms of reserves, it is equivalent to the sum of coalbed gas and tight gas, which is 2 to 3 times of the conventional gas resources on land. According to different geological preservation conditions, different shale characteristics, plus technical and cost factors, the amount of recoverable shale gas resources accounts for between 25% and 60% of the total resources, and the prospects for development and utilization are considerable.

2. China's shale gas reserves and distribution. According to the National Survey and Evaluation of the Potential of Shale Gas Resources and the Optimization of the Favorable Areas, the preliminary estimation of the country’s prospective resources is approximately 86 to 166 trillion square meters and the amount of recoverable resources is 25 trillion cubic meters (excluding the Qinghai-Tibet region). Mainly distributed in: Upper Yangtze region including Sichuan Basin and its periphery; Middle and Lower Yangtze and Southeast regions including Jianghan Basin, Zigui Basin, Sanshui Basin and its periphery; North and Northeast regions including Songliao Basin, Bohai Bay Basin, Brine Basin, Ordos Basins and margins; the northwest region includes small and medium-sized basins and margins such as Tarim, Qaidam, Tuha, Junggar, and Jiuquan; and the marine facies of the Paleozoic and Mesozoic in the Qinghai-Tibet region are developed, with prospects for shale gas enrichment; The Upper Yangtze and the Yunnan-Guizhou region have the largest amount of recoverable shale gas resources, about 9.5 trillion square meters, accounting for 39.6% of the national total; shale gas resources are most abundant in the Sichuan Basin and the periphery.

Third, the shale gas development environment

The world environment for shale gas development mainly refers to the “shale gas revolution” in the United States. In the research and development of shale gas technology, the United States stands out in the world. In particular, in the past decade, the breakthrough in shale gas exploration and development technology in the United States not only brought about explosive development of shale gas production in the United States, but also brought about a surge in shale oil production. According to the “World Energy Outlook” report released by the International Energy Agency, by 2020, the US shale gas boom will make it surpass Saudi Arabia and become the world’s largest oil producer. It is now the world’s largest gas producer over Russia. This will lead to a continuous decline in US oil imports until North America becomes a net oil export region around 2030, achieving energy independence. This drastic change will not only profoundly change the world's energy supply, but will also lead to profound changes in the world's geopolitics.

----From the United States, the annual output of shale gas in 2003 from 10 billion square tons to 2012 annual output of nearly 200 billion square meters (China's conventional natural gas, annual production of 100 billion square meters, imports 40 billion square meters).

---- The development of shale gas exploration and exploitation technologies has brought about rapid growth of shale oil and conventional oil production;

----It is expected that since 2015, the United States will achieve scale export LNG;

---- Breakthroughs and extensive application of exploration technology, horizontal wells and hydraulic fracturing technologies have resulted in the development of shale oil and gas unit costs that are basically the same as conventional oil and gas development costs.

At present, the price of natural gas for the United States has hovered between 0.65 and 0.8 yuan/yuan, which has effectively supported energy-related industrial costs and improved the overall competitiveness of the United States.

IV. Comparison of shale gas development in China and the United States

Objectively speaking, the gap between shale gas development in China and the United States is huge.

In the history of development, shale gas development in the United States has a history of nearly 80 years. Since the end of the 1970s, it has gradually incorporated domestic energy strategies and has actively advanced; while China’s understanding of shale gas is relatively late, domestically The big oil companies have long maintained a conservative attitude toward domestic shale gas development. This has led to a huge generational difference between China and the United States in oil and gas technology, equipment, related materials, and professional personnel. In terms of the development model, the United States adopts an open market-based exploration and development model, and has a sound policy and market supervision system. China is mainly a country-owned and monopolized business model of the four major oil companies. This is also an exploration of oil and gas resources in the United States and the United States. The cause of the development gap. In the development process, the United States has entered the stage of perfect commercial development and application, and China has just been in the initial stage of testing.

V. Current Status of China's Shale Gas Development and the State's Determination and Will to Develop Shale Gas

Having fully realized the gap between China's and the United States' oil and gas development strategies and development status, the country is determined to push shale gas development to market development, which will combine the efforts of national and aspiring enterprises to accelerate the development and application of shale gas in China.

Since 2000, the Chinese government and several major oil and gas companies have begun to pay attention to the exploration and development of shale gas and have mentioned the exploration and development of shale gas to an important agenda.

In 2006, CNPC and the United States Xintian Petroleum Corporation conducted the first international discussion on shale gas; in 2007, the joint research on the potential and development feasibility of shale gas in Weiyuan was further carried out. At present, China has completed more than 70 exploratory wells and industrial test wells, and some of the test wells now have a good amount of gas.

In June 2011, the Ministry of Land and Resources organized a tender for the first shale gas prospecting right in China through tender invitations and implemented shale gas prospecting in two blocks. Afterwards, the state formulated the overall working concept of “open market, standard access, full supervision, orderly competition, strengthening of foundation, technology guidance, multiple measures, and policy support” for the characteristics of shale gas exploration and development. The development of gas to adopt a positive incentive policy fully reflects the will of the country:

On December 3, 2011, the State Council approved the separation of shale gas from conventional oil and gas as an independent mineral in the 172 discovered mineral resources;

----The shale gas exploration mineral rights were tendered for transfer and exempted from resource taxes.

----On October 22nd, 2012, the state issued the "Shale Gas Development Plan (2011-2015)". By 2015, shale gas will reach 6.5 billion square meters of commercial production, and in 2020 it will reach 600 to 100 billion cubic meters.

On October 26, 2012, the Ministry of Land and Resources issued the "Notice on Strengthening the Exploration and Exploitation of Shale Gas Resources and Related Work of Supervision and Management by the Ministry of Land and Resources".

On November 1, 2012, the Ministry of Finance and the Energy Administration jointly issued the “Circular on the Subsidy Policy for the Development and Utilization of Shale Gases” to specify the financial resources for shale gas at RMB 0.4/m3 from 2012 to 2015. Subsidies, local finance can also provide appropriate subsidies for the development and utilization of local shale gas based on the local shale gas development and utilization.

The intensive introduction of relevant state encouragement policies has laid a solid foundation for the future industrialization of shale gas development and utilization.

6. Shale Gas Development Huadian in Action

1. The motivation of Huadian Action:

First, Huadian intends to seize the strategic opportunity for the country to develop shale gas and commit itself to the deep promotion of the Group's strategy of restructuring the structure;

Second, Huadian, as the largest natural gas user in China, has a strategic need for stable supply of gas resources.

Thirdly, Huadian has a strong marketization capability and has accumulated corresponding basic advantages for the development and utilization of shale gas.

Fourth, Huadian is looking forward to the development of the huge industrial market of the natural gas industry in the next 10 to 20 years, which will provide a new growth pole for building a new energy industry chain and achieving sustainable development.

2. The pace of Huadian Action

In the first half of 2011, the Group quickly responded and actively responded to the national shale gas development strategy call, decided to enter the shale gas development field, and deployed shale gas development and utilization; authorized Huadian Engineering as the implementation body of shale gas development of the group company. It officially opened the curtain for Huadian to enter the field of shale gas development and utilization.

Since then, Huadian Engineering has co-ordinated the relevant branches and subsidiaries, implemented the company's work and deployment, actively coordinated the advantages of shale gas resources provinces for resources, established a professional development team, and fully and steadily pushed forward the development of shale gas resources.

----In the first half of 2011, the Group started the knowledge popularization of shale gas development and started preliminary research;

From the end of 2011 to 2012, the group companies, General Manager Yun Cheng, General Manager Deng and General Deng led the team to North America to inspect and research shale gas development. In particular, in May 2012, the company’s general manager Yun personally led a team to the United States and Canada to inspect and drilled in-depth on the site of shale gas drilling and fracturing operations, clearly requesting Huadian Engineering to focus on three aspects of resources, human resources, and international technical cooperation. Promote it.

At the annual meeting of the group company in 2012, the group company's cloud chief clearly stated in the report that “we must increase the development of shale gas to the strategic level of the group company, formulate rules scientifically, accelerate the project layout, introduce specialized talents, and strengthen international Cooperation, the company's power to accelerate progress."

----On September 28th, 2012, the group company Cloud personally presided over the special meeting for shale gas development of the group company, clearly pointing out that: shale gas development should be taken as a strategic emerging industry development of the group company; clearly requirements: the group Up and down should be a unified understanding, firm confidence, a high starting point, high intensity and steady, rapid advancement; clear objectives: to ensure that the group company in the non-oil and gas central enterprises shale gas development in the leading position; clear organization: the establishment of the group company shale gas development leadership The group, deputy general managers of the group company, Chen Feihu and Deng Jianling, took the lead and fully organized and coordinated the development of shale gas.

Huadian shale gas development and utilization work, wind and water.

2. Achievements of Huadian Action

Under the guidance of the group company's strategic goals and the overall work and deployment of shale gas development and utilization, Huadian Group has achieved a leading position in the domestic non-oil and gas central government shale gas development competition.

----The strategic layout is gradually formed. Initially completed the development of regional layouts in the Yangtze River, Guizhou, Guizhou, and Middle-Lower Yangtze and Southeast areas in shale-rich areas: Strategic cooperation agreements for shale gas development were signed with Guizhou, Hunan, Hubei and Sichuan provinces and regional governments. Guizhou Shanneng Shale Gas Development Co., Ltd., Hunan Province Shale Gas Development Co., Ltd., Jiangxi Xinneng Shale Gas Development Co., Ltd. and Hubei Huadian Engineering Shale Gas Development Office were established.

---- The management system is gradually perfected. The group company initially established a group shale gas development management system: a clear definition of the centralized management department invested by the Ministry of Coal Industry for shale gas development, Huadian Engineering is the main body and implementation unit of shale gas development, and the general research institute is a shale gas development. The policy and technical support platform; successively approved the establishment of the Huadian Engineering Oil and Gas Development Branch and the China Huadian Shale Gas Development and Utilization Research Center.

---- Talent team has unique advantages. The group company has established its own oil and gas professional management and technical team. This team currently has more than 30 professional and technical personnel, including: 2 national "thousand-person plan" introduction, 16 senior and higher titles; 2 postdoctoral fellows, 7 doctors People, 8 masters. The preliminary ability to implement shale gas resource evaluation and exploration and development is such that a dedicated technical talent team is unique among non-oil central enterprises, making the group company occupy a leading dominant position among current non-oil and gas central enterprises.

---- Open up space for foreign cooperation. Cooperation with domestic and foreign companies and well-known institutions. Already established liaison mechanisms with foreign oil companies such as Chevron, Petronas, Schlumberger, Halliburton, Baker Hughes, and oil and gas service companies, and gradually carried out strategic cooperation and technical cooperation negotiations; Schlumberger and China University of Geosciences signed a strategic cooperation agreement.

---- Capital investment promotion work. Has completed the evaluation of the 1:20 resource potential in northwestern Hunan, the evaluation of shale gas resources in the Guangyuan and Neijiang regions of Sichuan Province, and the geological conditions of shale gas resources and the favorable evaluation of favorable areas in key areas of northwestern Hunan; completed the completion of Guizhou No. 1 well. Fracturing drainage.

---- Participate in the bidding for fruitful results. In September 2012, the Ministry of Land and Resources announced the second auction of shale gas exploration rights, Huadian Power Group had a single winner of 5 yuan out of a total of 19 tender blocks and became the biggest winner, enjoying a wide range of international and domestic energy industries. Attention.

---- Key block progressed smoothly. The resource evaluation of the shale gas block in Changde, Hunan Province has been carried out. The block has been approved by the Department of Land and Resources of Hunan Province as a demonstration block for the development and application of shale gas in the province to be submitted to the Ministry of Land and Resources for approval.

3. Value thinking and the next work goal

Based on the international and domestic energy revolutionary trends and shale gas development trend, based on Huadian’s first-mover advantage, we should continue to use value Huadian and value thinking as the basis for Huadian’s strategic implementation of shale gas development and fully recognize shale gas exploration and development. The stage theory (two stages), respecting the laws, and establishing the guiding ideology of the shale gas exploration and development stage on the basis of the value thinking.

Firstly, the oil and gas companies’ resource holdings and the amount of resource discovery are the core values ​​of the oil and gas companies based on the world's energy forests. The basic principle of oil and gas exploration is “exploration is risky and there is no failure in exploration at the same time”. At this stage, the central work of shale gas of the group company should be based on effective resource acquisition and solid scientific exploration to obtain proven "sweet" proven reserves. First, in accordance with the basic operational laws of oil and gas companies, they have been continuously acquiring effective resources to ensure the continuity of scientific exploration; the second is to establish a group to improve the scientific exploration system to guarantee the gold content of the “delicious” proven reserves value, as the next page The use of rock gas to further create value creates a solid foundation.

Secondly, the preparatory work for the application of shale gas exploitation shall be carried out in a down-to-earth manner, and shale gas engineering exploration and application shall be steadily and prudently promoted. The first is to establish a perfect operating system for shale gas extraction, and to formulate a relatively complete operating standard for group companies. The second is to increase engineering technology and cost research to ensure the reliability of the technology and cost of project mining. After the shale gas "sweet spot" resource enters the stage of engineering exploitation and application, it will be a large-scale investment behavior, and it should be established on the basis of the technical guarantee and cost guarantee (including cost control) of engineering exploitation, and be based on a sound and reliable system. To ensure the realization of mining investment value creation.

Basic thoughts and suggestions for the Group's "Twelfth Five-Year Plan" shale gas development goals:

----Overall guidance targets, to ensure Huadian shale gas development is the leading position in non-oil central enterprises, formulate Huadian shale gas development plan.

---- Efforts to obtain more than 10,000 square kilometers of prospective shale gas resources, and to achieve more than 100 billion cubic meters of resources for national approval and exploitation.

---- Realize industrial test gas.

----The preliminarily established the Huadian Group shale gas development operation system and formed a relatively complete standard for exploration and mining operations of Huadian Corporation.

---- Establish a more complete professional team of earth science and engineering technology.

----Complete the feasibility study of shale gas extraction engineering technology and cost, and define Huadian's business scope and business model for entering oil and gas services.

---- Actively strive to become a key supporting enterprise in the national shale gas development.