Greka Drilling (GDL) has secured a contract with state-owned China National Petroleum Corporation (CNPC) just three weeks after it announced that it had won a 100 well contract for Sinopec centred on China's Ordos basin. The CNPC deal involves the use of GDL's proprietary LiFaBriC production method for a coal-bed methane gas deposit in CNPC's Zhengzhuang block, with deployment of an initial two-well programme expected during the first quarter. If successful, it is expected that CNPC will roll-out the LiFaBriC method across the Qinshui basin, where traditional drilling methods have failed to deliver satisfactory flow results. The CNPC and Sinopec deals represent Greka's first third-party contacts since it was spun out of parent company Green Dragon Gas (GDG) in 2010. Although Greka's operations are underpinned by long term contracts linked to GDG's drilling programme in China, the new deals could afford opportunities for growth, particularly as CNPC is planning to drill as many as 2000 wells across its onshore acreage this year.
There is certainly no shortage of state-sponsored incentives for producers such as CNPC. Beijing has been encouraging domestic energy companies to boost natural gas production to counter soaring demand during the winter months; a problem exacerbated by inadequate transportation and gas storage facilities. And with private car ownership expanding rapidly, Chinese authorities have prioritised the roll-out of LNG-fuelled vehicles in a bid to improve the notoriously poor air quality of the country's urban spaces. CNPC has previously stated that domestic production should treble over the next 20 years, although imports will also need to increase substantially. The likes of Sinopec and CNOOC are already developing LNG facilities along China's eastern coast to meet rising demand.
