--Honghua aims to form joint venture with foreign company for
shale-gas drilling, fracking
--Honghua in talks with foreign oil major to offer site-support
services for shale gas
--Company also hopes to offer site-support system for shale gas
in China
BEIJING--Honghua Group Ltd. (0196.HK), China's largest exporter
of drilling rigs, is in talks with a leading overseas oil
field-services company to establish a joint venture to offer
shale-gas drilling and hydraulic-fracturing services to global
customers, Honghua Group's Chairman and President Zhang Mi said
Wednesday.
Honghua is also in talks with a major foreign oil company
interested in using Honghua's site-support system to explore and
develop shale gas, Mr. Zhang said in an interview.
The company's goal is to become China's largest drilling and
hydraulic-fracturing services provider, Mr. Zhang said. Hydraulic
fracturing, also known as fracking, is a method of using water to
free up natural gas locked in shale deposits.
"We are looking to establish a joint venture with one of the
world's leading oil-field services companies that has experience in
the U.S. shale market," he said. "We want to team up to be the best
shale-gas exploration service provider in China," he said.
"We have the equipment and workforce for drilling, but we lack
fracturing expertise," Mr. Zhang added.
Honghua's plan is underpinned by a trend of foreign companies
with shale-gas exploration expertise eager to team up with Chinese
companies in the country, which hosts possibly the world's largest
shale reserves, with an ambitious target to produce 6.5 billion
cubic meters of shale gas per year by 2015, up from zero
currently.
Earlier this week, U.S. oil services giant Schlumberger Ltd.
(SLB) purchased a 20.1% stake in Hong Kong-listed Anton Oilfield
Services as it seeks to enter the Chinese market.
Honghua's site-support system for assisting in shale-gas
exploration and development uses less equipment and requires a
smaller footprint compared with traditional methods, he said,
adding that it reduces overall costs, energy consumption and carbon
emissions.
The company has set a year-end oil-field service target of
employing between 500 and 700 people capable of working on 11
drilling platforms, up from 200 people capable of working on three
platforms in 2011, he said.
Mr. Zhang said Honghua will launch a demonstration of its
site-support system for shale-gas exploration and development by
year end and plans to commercialize the system within two
years.
He also said the company hopes to offer the system in China,
which has been trying to open up its shale-gas sector to private
investment.
"We are actively looking to join as minority investors in a
shale-gas exploration project when a second tender is held," Mr.
Zhang said.
China offered four blocks in its first shale-gas tender in June
2011, but only state-owned companies were allowed to bid. It will
launch a second tender later this year and extend bidding to
domestic private companies as well.
Headquartered in the southwestern Chinese city of Chengdu,
Honghua is one of the largest onland drilling rig manufacturers in
the world.
Last year, Honghua sold more than 90% of its rigs to customers
outside China, including 30% to the Americas, 30% to the former
Soviet Union and 20% to the Middle East, Mr. Zhang said.
Write to Sarah Chen at Sarah.Chen@dowjones.com