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Business / Industries

Firms see a new gold rush in shale gas

By Zhou Yan (China Daily) Updated: 2012-07-16 09:34

Firms see a new gold rush in shale gas

Shale gas is a clean and efficient energy trapped within shale formations. China is estimated to have 25.1 trillion cubic meters of exploitable shale gas resources, exceeding the 24.4 trillion cu m in the United States, making it the world's biggest. If all gas can be extracted from the shale, it will able to meet natural gas demand for the world's second biggest energy consumer for two centuries.

China produced more than 103.1 billion cu m of natural gas last year with 7.3 percent year-on-year growth. Apparent consumption - production plus imports minus exports - was 129 billion cu m in the same year.

It topped the world with its 22 percent year-on-year growth in natural gas demand last year, with increasing Chinese production, imported pipe gas and liquefied natural gas supplies, according to the BP Statistical Review of World Energy.

China's natural gas consumption will be doubled within the 12th Five-Year Plan period (2011-2015) to account for 8 percent of its total energy mixture by the end of 2015 from 4 percent now, said Jiang, from the National Development and Reform Commission.

He added that the development of shale gas is a strategic move, given China's ever-growing shortage of natural gas.

Imported gas made up about 20 percent of domestic gas consumption. The share is estimated to rise up to 40 percent by 2020.

"Shale gas development is a 'revolution' to increase domestic gas supply, improve the energy mixture and protect energy security," said Jiang.

However, in contrast to the widespread enthusiasm in the new market, mostly buoyed by the shale gas boom in the US, the geological data in China is limited and its viability remains doubtful.

"The geology of China's shale gas reserves, as well as the country's water shortages, insufficient pipeline infrastructure, government control over natural gas prices and environmental issues will all challenge China's ambitions, despite the country's extensive plans to support and encourage industry growth," Global Data Ltd, a global business intelligence provider based in London, said in a recent report.

China started tracking shale gas in 2000 with little breakthroughs in terms of policies until 2011, when the geological research and surveys kicked off amid a slew of policies to support its growth.

The country that has yet to have any commercial production has set an ambitious target to produce 6.5 billion cu m of shale gas by the end of 2015, even though it hasn't precisely determined the rough reserves of the energy source beneath the ground.

As of May, China had drilled 63 evaluation shale gas and shale oil wells in total to get the basic parameters, according to Li Yuxi, a researcher at the ministry's oil and gas strategy center. It's uncertain whether these can grow into commercial production.

In contrast, since its first well in 1821, the US has drilled about 80,000 wells across the country. They have annual production of about 170 billion cu m, Li said. China's commercial production hasn't started.

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