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Looking to satisfy its growing fuel demands, China is turning to shale gas, natural gas trapped within rock formations.
“China has huge reserves of shale gas. If successful industrialized production is realized, it would significantly ease the nation’s energy strain,” said Li Shousheng, deputy head of the China Petroleum and Chemical Industry Federation.
China has about 20 percent of the world’s total shale gas reserves, the largest in the world, according to a report published by the Ministry of Land and Resources (MLR) on July 23.
The top five countries with the largest minable shale gas reserves are China, the United States, Argentina, Mexico and South Africa.
China’s interest in shale gas exploration is increasing with an estimated output of 6.5 billion cubic meters expected by 2015. From 2016 to 2020, the country will enter a fast-growth period in shale gas exploration and development, Liu Tienan, head of the National Energy Administration, said.
Shale gas is formed by gas trapped within shale formations. With methane as its main ingredient, it is a clean and efficient source of energy. The gas is collected through a complicated process called hydraulic fracturing, or fracking. The gas has become an increasingly important source of natural gas and may transform the world’s future energy outlook.
A global trend
The United States introduced fracking technology to the world. Since then, its exploitation technology and optimized pipe network infrastructure have put shale gas exploration on par with collecting other natural resources.
From 2006 to 2010, the output of shale gas in the United States increased 20 fold, from 1 percent of the total output of the country’s natural gas in 2006 to 20 percent in 2010. In 2011, the shale gas output in the United States totaled more than 170 billion cubic meters, greatly enhancing the country’s stocks of natural gas and reducing its dependence on energy imports.
The shale gas revolution has helped the country become the leading nation in terms of natural gas stocks and also cut its oil imports from 60 percent of total consumption in 2005 to 46 percent. Experts estimate that the United States can change its current reliance on natural gas imports, realize self-sufficiency or even become a leading exporter of natural gas in the next 10 years.
“The exploitation of shale gas has become a highlight of global oil and gas resource extraction,” said Zhang Mingsen, deputy chief engineer of Sinopec’s Beijing Chemical Research Institute. “This is bound to change the structure of global energy exploration.”
China’s Sichuan Basin, Ordos Basin, Tarim Basin, the west Hubei and east Chongqing area, and Guizhou and Hunan provinces boast huge stores of shale gas, according to a survey conducted by the MLR.
To tap its reserves, the Chinese Government has unveiled a string of policies to boost production. In March, the government released the 2011-15 plans for the shale gas industry, during which time major shale gas development zones will be established.
According to the plan, the country is set to increase its currently next-to-nothing production to 6.5 billion cubic meters a year by 2015, and then to 60 to 100 billion cubic meters by 2020.
State-owned petrochemical heavyweights such as PetroChina, Sinopec and Henan Provincial Coal Seam Gas Development and Utilization Co. Ltd. are testing the waters by making efforts to acquire and collaborate with overseas owners and developers.
China currently has 62 shale gas wells in trial development zones, 24 of which have been able to generate output qualified for industrial use. But to date, China has not started commercial production of shale gas.
There is now a growing urgency in China to further encourage the development of unconventional energy sources as it believes such steps are essential to help reduce the nation’s carbon emissions and gas imports.
Difficulties
Despite the ambitious goal, several hurdles stand in the way of commercial exploration.
China’s shale gas development is still at the primary stage, and has a long way to go toward mass commercial use, said Liu Yijun, a professor with the China University of Petroleum.
Chinese shale gas drillers face two major difficulties during the “fracking” process: tough geographical conditions and a technological barrier, he said.
Compared with the United States, China’s shale gas is haphazardly distributed, and uncertainties still remain in the reserve appraisal process. In addition, domestic developers still largely rely on foreign technology, equipment and materials, making costs stubbornly high, he added.
Christof Ruehl, chief economist at BP, said China’s huge energy demands will make it impossible for the country to give up on shale gas, adding that the key lies in technological innovation to make development safe and efficient.
The environmental impact has also complicated shale gas development in China. Since the drilling process consumes huge amounts of water and land, a number of projects have been suspended in some countries.
China and the United States have totally different environments. The per-capita land and water resources in China are far less than those in the United States, and long-term over-exploitation has made China’s ecology more fragile, said observers.
China cannot copy what the United States has done. The nation needs a more landefficient, water-efficient, economical and environmentally friendly blueprint to achieve the goal, they said.
Creating an effective business model is another test for the industry. In the United States, small companies lead the field in technological research and commercial application. Big companies adopt their methods only after the smaller ones score stable returns.
China’s shale gas industry has yet to form an effective business model, said Liu Yijun.
China’s shale gas industry will be open to all types of investors. Departments involved should offer tax and fiscal incentives to investors, said Liu Tienan.
“It’s not enough to have macro plans and blueprints. We need to have practical measures. China needs to intensify its efforts in basic research and tries to score breakthroughs within a short period of time. We need to fully grasp the key exploration technology of shale gas,” said Zhang.
Concerned departments should attach more priority to the research on shale gas exploration technology, increase input and earmark special funds for it, said Zhang. “For a more successful business mode, on the one hand, the initiative of drills should be protected; on the other hand, an appropriate threshold should be set as early as possible. Besides, the government should be highly cautious about trading resources for technologies.”
“China has huge reserves of shale gas. If successful industrialized production is realized, it would significantly ease the nation’s energy strain,” said Li Shousheng, deputy head of the China Petroleum and Chemical Industry Federation.
China has about 20 percent of the world’s total shale gas reserves, the largest in the world, according to a report published by the Ministry of Land and Resources (MLR) on July 23.
The top five countries with the largest minable shale gas reserves are China, the United States, Argentina, Mexico and South Africa.
China’s interest in shale gas exploration is increasing with an estimated output of 6.5 billion cubic meters expected by 2015. From 2016 to 2020, the country will enter a fast-growth period in shale gas exploration and development, Liu Tienan, head of the National Energy Administration, said.
Shale gas is formed by gas trapped within shale formations. With methane as its main ingredient, it is a clean and efficient source of energy. The gas is collected through a complicated process called hydraulic fracturing, or fracking. The gas has become an increasingly important source of natural gas and may transform the world’s future energy outlook.
A global trend
The United States introduced fracking technology to the world. Since then, its exploitation technology and optimized pipe network infrastructure have put shale gas exploration on par with collecting other natural resources.
From 2006 to 2010, the output of shale gas in the United States increased 20 fold, from 1 percent of the total output of the country’s natural gas in 2006 to 20 percent in 2010. In 2011, the shale gas output in the United States totaled more than 170 billion cubic meters, greatly enhancing the country’s stocks of natural gas and reducing its dependence on energy imports.
The shale gas revolution has helped the country become the leading nation in terms of natural gas stocks and also cut its oil imports from 60 percent of total consumption in 2005 to 46 percent. Experts estimate that the United States can change its current reliance on natural gas imports, realize self-sufficiency or even become a leading exporter of natural gas in the next 10 years.
“The exploitation of shale gas has become a highlight of global oil and gas resource extraction,” said Zhang Mingsen, deputy chief engineer of Sinopec’s Beijing Chemical Research Institute. “This is bound to change the structure of global energy exploration.”
China’s Sichuan Basin, Ordos Basin, Tarim Basin, the west Hubei and east Chongqing area, and Guizhou and Hunan provinces boast huge stores of shale gas, according to a survey conducted by the MLR.
To tap its reserves, the Chinese Government has unveiled a string of policies to boost production. In March, the government released the 2011-15 plans for the shale gas industry, during which time major shale gas development zones will be established.
According to the plan, the country is set to increase its currently next-to-nothing production to 6.5 billion cubic meters a year by 2015, and then to 60 to 100 billion cubic meters by 2020.
State-owned petrochemical heavyweights such as PetroChina, Sinopec and Henan Provincial Coal Seam Gas Development and Utilization Co. Ltd. are testing the waters by making efforts to acquire and collaborate with overseas owners and developers.
China currently has 62 shale gas wells in trial development zones, 24 of which have been able to generate output qualified for industrial use. But to date, China has not started commercial production of shale gas.
There is now a growing urgency in China to further encourage the development of unconventional energy sources as it believes such steps are essential to help reduce the nation’s carbon emissions and gas imports.
Difficulties
Despite the ambitious goal, several hurdles stand in the way of commercial exploration.
China’s shale gas development is still at the primary stage, and has a long way to go toward mass commercial use, said Liu Yijun, a professor with the China University of Petroleum.
Chinese shale gas drillers face two major difficulties during the “fracking” process: tough geographical conditions and a technological barrier, he said.
Compared with the United States, China’s shale gas is haphazardly distributed, and uncertainties still remain in the reserve appraisal process. In addition, domestic developers still largely rely on foreign technology, equipment and materials, making costs stubbornly high, he added.
Christof Ruehl, chief economist at BP, said China’s huge energy demands will make it impossible for the country to give up on shale gas, adding that the key lies in technological innovation to make development safe and efficient.
The environmental impact has also complicated shale gas development in China. Since the drilling process consumes huge amounts of water and land, a number of projects have been suspended in some countries.
China and the United States have totally different environments. The per-capita land and water resources in China are far less than those in the United States, and long-term over-exploitation has made China’s ecology more fragile, said observers.
China cannot copy what the United States has done. The nation needs a more landefficient, water-efficient, economical and environmentally friendly blueprint to achieve the goal, they said.
Creating an effective business model is another test for the industry. In the United States, small companies lead the field in technological research and commercial application. Big companies adopt their methods only after the smaller ones score stable returns.
China’s shale gas industry has yet to form an effective business model, said Liu Yijun.
China’s shale gas industry will be open to all types of investors. Departments involved should offer tax and fiscal incentives to investors, said Liu Tienan.
“It’s not enough to have macro plans and blueprints. We need to have practical measures. China needs to intensify its efforts in basic research and tries to score breakthroughs within a short period of time. We need to fully grasp the key exploration technology of shale gas,” said Zhang.
Concerned departments should attach more priority to the research on shale gas exploration technology, increase input and earmark special funds for it, said Zhang. “For a more successful business mode, on the one hand, the initiative of drills should be protected; on the other hand, an appropriate threshold should be set as early as possible. Besides, the government should be highly cautious about trading resources for technologies.”