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Can Sinopec's (SNP) Fuling Field Help Meet Mounting Demand?

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China Petroleum & Chemical Corporation (SNP - Free Report) or Sinopec recently announced that the Fuling Shale Gas Field has produced more than 40 billion cubic meters (bcm) of natural gas since the commencement of commercial development in 2014.

The gas field is located in the Fuling District of Chongqing City and has provided more than 200 million locals staying in the Yangtze River Economic Belt with a cleaner energy source. The consumers are spread across 70 or more cities in six provinces. The field currently produces 20 million cubic meters of natural gas per day.

China intends to increase natural gas usage significantly for power generation, slowly moving away from coal-fired power plants, to reduce greenhouse gas emissions. As such, it became a major gas importer in the last few years. The country has also opted for several projects for import substitution, incorporating the Fuling Shale Gas Field that addresses the demand in the Yangtze River Economic Belt. The gas field’s production capacity of 10 bcm per annum is expected to reduce 12 million tons of carbon dioxide emissions per annum.

It is the country’s first large-scale shale gas field that has reached such a high production capacity. The field’s proven reserves are estimated at 792.641 bcm. This major field is expected to be crucial for the country, which is currently facing high demand and low supply. Due to soaring demand, the country was forced to boost coal production, per Reuters.

The country is trying to fulfill energy needs with available options as the rebound in economic activities has led to a significant increase in hydrocarbon consumption, which had taken a hit earlier due to the coronavirus pandemic. Also, the cold winter prediction is likely to keep natural gas demand high in the country and worldwide. The energy crisis, especially in Europe, is keeping commodity prices at a multi-year high and positioning companies with upstream business to generate tremendous profits.

Sinopec, being a major gas provider in China, is expected to witness a boost in the bottom line. In Europe, energy mammoths like Royal Dutch Shell plc (RDS.A - Free Report) , Eni SpA (E - Free Report) and Equinor ASA (EQNR - Free Report) are also expected to witness a similar favorable pricing scenario. Despite several analysts and groups predicting an aggressive takeover of the energy spectrum by renewables, economies are currently gasping for more hydrocarbons due to low supply as well as mounting demand, thanks to multiple vaccine rollouts around the world.

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