Re Joint Venture

RNS Number : 7206W

Weir Group PLC

24 November 2010

 



THE WEIR GROUP PLC

24 November 2010

Weir to form Chinese JV focused on shale gas

The Weir Group PLC and Shengli Oilfield Highland Petroleum Equipment Co. Ltd. ("Highland") announce the formation of a joint venture to provide high-pressure well service pumps and related flow control equipment to the developing shale gas industry in China. 

The JV is expected to commence operations in the first half of 2011, subject to regulatory approvals.  It will be owned 60% by Weir and 40% by Highland and will be based in Dongying, Shandong Province, China.  The JV will build on the success achieved by Weir SPM, a leading manufacturer of specialised products for the oil and gas market which has benefited from the development of shale gas production in North America.

Commenting on the new JV, Weir's chief executive, Keith Cochrane, said:  "The JV with Highland presents a great opportunity for Weir SPM to apply its expertise in well service pumps and flow control equipment to the accelerating Chinese unconventional gas market.  Our partnership with Highland, with its extensive customer relationships and market knowledge, will be a key enabler for production from China's shale gas reserves."

Yang Xianping, chairman of Highland, added:  "We are delighted to be working with Weir and are excited by the opportunity to be associated with the Weir SPM technology and brand, renowned globally in the oil and gas arena.  We look forward to many years of success with our new partners."

Weir anticipates investing US$6.2m (£3.9m) in the JV during its first two years of operation.

Contact details:

The Weir Group PLC

Helen Walker, Public Relations Manager Tel. [phone] (Mobile: [phone])

Maitland Tel. [phone]

Suzanne Bartch

Rowan Brown

NOTES FOR EDITORS:

Shale gas

Shale gas is an "unconventional" source of natural gas, released from rock formations by hydraulic fracturing, a technology centred on specialised pumps of which Weir's SPM is a leading manufacturer.

Weir SPM

Based in Fort Worth, Texas, Weir SPM's product offering centres on high-pressure well service pumps and related flow control equipment such as valves, chokes, manifolds, swivel joints and connectors which operate in abrasive, high-wear environments.  Customers include manufacturers of well service equipment, well service operators, drilling contractors, oilfield supply houses and integrated oil companies.  Further information on Weir SPM is available from www.weiroilandgas.com

Highland

Shengli Oilfield Highland Petroleum Equipment Co. Ltd. was established in 1992 and is located in Dongying, Shandong Province, China.  The company offers an extensive range of drilling and production equipment and services mainly for the oil and gas industry.  Major customers include Sinopec, CNOOC and CNPC.  Further information on Highland is available from its website http://en.chinahighland.com

Weir in China

Weir has been developing its footprint in China over a number of years.   It has two wholly owned subsidiaries in Suzhou, Jiangsu Province - one focused on the mining industry and the second in the power sector.  In addition, Weir has a sourcing operation based in Shanghai.   Pump and valve equipment is also supplied from a number of Weir's western based companies to major projects including China's extensive new build nuclear programme.

Shale gas in China

China, which is heavily dependent on imported oil and gas, hopes to replicate with its own shale gas reserves the success seen in US unconventional gas production:

·      The International Energy Agency estimates China's shale gas reserves at 26 trillion cubic metres.  (At the end of 2008, proven shale gas reserves in the US were reported by the Energy Information Administration to be 32.8 trillion cubic metres.)

·      The Strategic Research Centre for Oil and Gas of China's Ministry of Land and Resources set a goal in early 2010 to locate one trillion cubic metres of recoverable shale gas reserves, build 15-30 billion cubic metres of production capacity and produce 8-12 percent of China's natural gas from shale gas wells by 2020.

·      The Communist Party of China Central Committee's October 2010 proposal for China's 12th 5-year plan includes a target to "nurture and develop seven new strategic industries with favourable policies in the next five years".  The industries include new energy, and according to Chinese media reports, China has widened the scope of energy sources covered by the 5-year plan to include unconventional gas.

·      China National Petroleum Corporation (CNPC) aims to produce 500 million cubic metres of shale gas by 2015.

·      Sinopec aims to increase its unconventional gas production capacity to more than 2.5 billion cubic metres annually by the end of 2015.

Sources: International Energy Agency, Energy Information Administration, Financial Times, Reuters, CPC Central Committee's Proposal for Formulating the 12^th Five-Year Program for China's Economic and Social Development (2011-2015), company websites

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