Sinochem in first investment in US energy

Pays US$1.7 billion for 40% stake in shale oil firm

Sinochem Group recently made a massive first investment the US energy sector, buying a 40% stake in Pioneer Natural Resources, a Texas shale oil and gas development company.

The buy-in will give Sinochem, the Chinese state-controlled oil and chemical conglomerate, access to 207,000 acres of land leased by Pioneer in Wolfcamp, a shale development in the Spraberry Trend area field. Sinochem will also pay US$1.2 billion of Pioneer’s share of future drilling costs.

Shale gas, natural gas trapped in rock and extracted through a water-intensive process known as hydraulic fracturing or “fracking.” China is believed to have the largest shale gas reserves in the world but lacks the technology and experience to economically mine this new energy source.

Some experts believe China could have some 25 trillion cubic metres of recoverable shale gas reserves, about 20% of the global total. This compares to the US’ 13%.

Under the deal with Sinochem, Pioneer will continue as operator and will conduct all leasing, drilling, completion, operations and marketing activities in the joint interest area.

The Spraberry Trend, also known as the Spraberry Field, is a large oil field in west central Texas covering large parts of six counties, and having a total area of approximately 6,500 km2.