According to a Dec 23 statement on its website, China Shenhua plans to move 90 million US dollars to its wholly-owned overseas subsidiary to set up a US branch (temporarily named Shenhua US energy companies) as the main body investing in a US shale gas project with Energy Corporation of America(ECA).

China Shenhua, a world-leading coal-based integrated energy company, is the largest coal supplier and vendor in China. The company announced plans to commence Chinese shale gas development together with Statoil in March last year. On this occasion China Shenhua is showing its wider ambitions by expanding its diversified business scope into the U.S. Shale gas market.

Shale gas is a natural gas that is found trapped within shale formations. It has become an increasingly important source of natural gas in the United States since the start of this century, and interest has spread to potential deposits throughout the rest of the world.

The announcement also indicates that an estimated US $146 million will be invested in the cooperative development with ECA of 25 shale gas wells in Greene County, Pennsylvania. China Shenhua will contribute 90 million US dollars through its US branch. The remainder of the investment will be shared equally by China Shenhua's overseas subsidiary and ECA. In addition, ECA will transfer 50% of undivided interest and related information in its lease of 25 natural gas wells in Greene County to the overseas subsidiary of China Shenhua.

China Shenhua recognizes that the project carries a relatively high risk because of the short history of industrial production of shale gas.

China Shenhua also released an acquisition of assets and connected transaction announcement on the same day. The company intends to raise funds through an initial public offering of A shares (China Shenhua's own funds to fill any shortfall) to acquire 100% equity in Shenhua Baotou Coal Chemical Co. Ltd. and Shenhua Guohua Jiujiang power Generation Company Limited.

China Shenhua believes its entry into US shale gas market will help to grow the company and further improve the business structure, both of which aims meet the requirements of the company’s development strategy of integrated operations and industry chain extension. The acquisition of Shenhua Baotou Coal Chemical will further develop the company’s coal chemical business activity, realizing a horizontal expansion and adding coal chemicals to its interests in the coal power industrial chain.