China’s top refiner, Sinopec Group, is seeking partners to buy half of its two biggest shale gas fields in Western Canada to share the costs that are too heavy for Sinopec to bear alone.
The two shale gas fields, Montney and Duvernay, are operated by the Calgary-based Sinopec Daylight Energy, which Sinopec acquired in 2011 for $2.1 billion.
According to Feng Zhiqiang, chief executive of Daylight Energy and newly appointed chairman of North America operations at Sinopec International Petroleum Exploration and Production Corp, the high cost of drilling and weak gas prices have caused negative cash flows in Daylight Energy, which is seeking joint-venture partners to optimize assets.
The move to sell assets is unusual for China’s state energy companies which are keen to acquire overseas resources, the Reuters said.
But some industry experts believe shale gas producers have to constantly drill new wells in order to maintain the gas output which can drop dramatically over years in existing wells. Sinopec’s seemingly rare move turns out to be a common strategy among shale gas producers to spread the increasing costs incurred by new drilling.
Prices for the stakes to be sold were not disclosed and Sinopec wants to remain the operator.