(Adds commercial output by early Dec)
BEIJING, Dec 9 (Reuters) - China's total output ofcommercial shale gas by early this month stood at 143 millioncu. m. through pilot drilling, mostly in the southwest Sichuanbasin, official China Energy News reported on Monday.
Main production comes from Sinopec Corp's Fulingoperation, where 10 horizontal wells in test production haddaily output of 150,000 cu. m. per well, the paper said, citingthe National Energy Administration.
The move raises hope for a breakthrough in China's shaledevelopment.
Fuling, in Chongqing municipality, is expected to pump 3.3billion cubic metres a year towards the end of 2015, the papersaid, on track for a government target of 6.5 bcm/year by 2015.
Other promising areas include Changning-Weiyuan andZhaotong, both operated by PetroChina, and theFushun-Yongchuan block which is being jointly developed byPetroChina and Royal-Dutch Shell, the paper said.
China, believed to hold the world's largest resource ofshale gas, hopes to replicate the production success of theUnited States, but faces huge technological and environmentalchallenges due to its more complex geology and scarce water.
The government, led by the Ministry of Land & Resources,wants to broaden competition in the sector and has held twoshale gas auctions so far.
The first, in July 2011, was won by state energy giantSinopec Corp and a regional coal-seam company, but thesecond one was won by 16 domestic firms, mostly non-oilcompanies, who would need to buy in the expertise required.
Here are facts on China's shale gas sector, drawn fromcompany statements, state media and industry officials.
TENDERS
In June 2011, the Ministry of Land Resources (MLR) issuedChina's first shale gas tender targeting six domestic firms.
Top state energy firm PetroChina has said it would pump 1.5bcm of shale gas in 2015, the first such target for commercialshale gas production. Most of it would come from the Sichuanbasin, in southwestern China.
In a second auction concluded last December, 16 localcompanies were awarded 19 blocks and pledged to spend $2 billionover the next three years, but none of these firms haveexperience drilling for gas.
State utility China Huadian Corp, one of the second tenderwinners, plans to tender later this year for engineeringservices. It plans to drill more than 40 wells over the nextthree years with a budget of 2.7 billion yuan.
RESERVES
China has 25.08 trillion cubic metres of potentiallyrecoverable shale gas resource, says MLR, in charge of resourceregistrations and mining rights.
That compared to the U.S. Energy Information Agency'sestimate in March last year that put China's technicallyrecoverable shale gas reserves at 36.1 tcm, exceeding U.S.reserves of 24.4 tcm.
In March 2012, the government said the industry wouldestablish 19 key exploration and production zones by 2015 in 13provinces and regions including Sichuan, Chongqing, Guizhou,Hunan, Hubei, Yunnan, Anhui, Jingxi, Shaanxi, Liaoning andXinjiang.
GEOGRAPHY
There may be shale gas in China's Sichuan basin, Erdosbasin, Bohai Bay, Songliao basin, Jianghan basin, Tuha basin,Tarim basin and Junggar basin, mostly in the west and north.
The upstream regions of the Yangtze River valley, whichinclude southern and eastern parts of Sichuan province,southeastern parts of Chongqing, northern parts of Guizhou andwestern parts of Hubei, are likely to contain sizeable deposits,MLR preliminary estimates show.
WELLS SUNK
Industry estimates show close to 150 wells were drilled bythe end of 2013, mainly by PetroChina, Sinopec, YanchangPetroleum and Royal Dutch Shell.
About 27 of these were horizontal wells. So far three wellshave yielded a daily output of 60,000 to 130,000 cu.m. in testproduction, including one PetroChina well in Weiyuan block,Jiaoye HF-1 drilled by Sinopec and a third one drilled by Shellin Fushun block. All three are in the Sichuan basin.
PetroChina has been focusing on the Sichuan basin,geologically more similar to basins in the United States.Sinopec's drilling covers both marine and continental basins.
POLICY
China in late 2011 established shale gas as a resourceindependent of conventional hydrocarbons, to let in moreindependent players. It was followed by a policy to free upwellhead, or wholesale prices, for unconventional gas, to spurexploration.
(Compiled by Chen Aizhu; Editing by Clarence Fernandez)
