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Page added on October 19, 2013
Shale gas sector gears up in China
Two months before the expected third round of bidding for shale gas exploration rights, a Chinese firm on Friday successfully tested extraction equipment.
The equipment will operate in complex geographic conditions, according to the manufacturer, the Shenzhen-listed Yantai Jereh Oilfield Services Group Co Ltd, which is based in Yantai, Shandong province.
“The machines can be used in areas with poor roads and uneven land for long operational periods with a heavy workload,” said Cui Rizhe, the director of the manufacturer’s technology center.
As the country’s natural gas consumption continues to rise, unconventional energy, such as shale gas, have become popular in recent years.
The United States – the world’s largest shale gas producer – is expected to become an energy exporter soon, because of its large-scale and successful shale gas development projects.
According to the US Energy Information Administration, China has the world’s largest shale gas reserves, estimated at 36 trillion cubic meters.
But the difficult geographic conditions in areas with shale gas blocks – a very different situation from that seen in the US – pose many obstacles for Chinese extraction projects.
The country’s shale gas exploration efforts are still at a preliminary stage, with issues in terms of water consumption and technology, in addition to the geographic problems.
According to Cui, shale gas developers could save 40 percent of labor costs, 50 percent of diesel consumption and 60 percent of their water usage if they use his firm’s equipment.
“The lower costs will greatly help China at the current stage of the exploration projects,” Cui said.
The whole set made available by Jereh includes 15 types of equipment, providing the technology needed for the shale gas fracturing process, he said.
A shale gas exploration firm already has shown interest in leasing the equipment, Jiang Xiaobao, Jereh’s vice-president, told China Daily on Friday. He declined to disclose the name of the potential client.
Jereh – the only Chinese firm that supplies shale gas equipment to North American companies – has been developing machines in recent years tailored for Chinese projects, hoping to seize business opportunities during a boom in the sector.
The company exported shale gas fracturing equipment to the US in 2011.
Jereh’s exports will account for about 40 percent of its total revenue in 2013, but its long-term goal is to expand that figure to 60 percent in the next five to six years, said Cheng Yongfeng, the company’s board secretary.
“We’ll expand to markets including Russia, Central Asia, the Middle East and Kazakhstan in the future to achieve that goal,” he said.
The third round of bidding for China’s shale gas exploration rights is expected to be held by the end of the year, and its scale will surpass the total of the previous two rounds, said an industry observer close to the Energy Research Institute of the National Development and Reform Commission.
“In the technology sector, China has made some breakthroughs which will help it cut exploration costs,” said a report from Sublime China Information Co Ltd, a domestic commodities consultancy.
In the previous two rounds of bidding, the companies’ level of actual exploration after winning the bids was much lower than expected, which has raised some questions.
One Comment on "Shale gas sector gears up in China"
rockman on Sun, 20th Oct 2013 1:05 pm
Just to put a touch of reality to the story. First the typical misleading approach: the EIA “reserve” numbers are actually “technically recoverable reserves” meaning that even if they are not economically recoverable they are still counted as “reserves”. Which means at best they should be considered as resources and not reserves. Even with that qualification I have serious doubts about the volume of the technically recoverable numbers given the extremely limited amount of testing done to date on the Chinese shales. The most common sedimentary rock on the planet is shale and the vast majority of those formations have been proven to have very little to no NG production. Shales are not universally capable of producing commercial NG. There are dozens of other shale formations in the same area as the Eagle Ford Shale, some immediately above and below the EFS currently being drilled, and they are not being developed.
From: http://www.marketwatch.com/story/china-shale-gas-goals-pipe-dreams-experts-say-2013-08-26
China wants to reap the benefits of a shale gas revolution similar to the one in the United States, but there are many obstacles to this happening, experts say.
In the first half of 2013, 56 shale gas wells were in the exploratory phase in the country, but only 24 were producing gas.
Only six wells, all dug by China Petroleum, had daily output capacity of 10,000 cubic meters or more. And all the shale gas blocks sold in the most recent round of auctioning were in the early phases of prospecting, meaning they hadn’t produced a drop.
The latest five-year plan set for the shale gas industry was laid out in 2011. It set a production goal of 6.5 billion cubic meters of shale gas by 2015, but many industry insiders say this will be hard to achieve.
“As we are facing enormous cost pressures and other problems, the speed of exploration has been slower than anticipated,” Zhang Dawei, director of the Mineral Resources and Reserves Evaluation Center of the Ministry of Land Resources (MLR), said at a symposium in June.
Chen Weidong, lead researcher at China National Offshore Oil Corp.’s, said the average annual production of a shale gas well in the United States is about 5 million cubic meters, and China would need 1,300 operating wells to reach its goal.
“At present, it costs us about 80 million to 100 million yuan ($13.1 million to ($16.3 million) to develop a single well,” he said. “So even if we were successful in developing the number of wells required, we’d be looking at 130 billion yuan [in upfront investment].
“To achieve the shale gas production goal of 60 to 100 billion cubic meters by 2020, we would need to dig at least 20,000 wells. That’s 2 trillion yuan. Is this possible?”
And there is no sign the wells needed to achieve these lofty goals are in the works.
The director of the Shale Gas Department of the MLR Geological Survey Department, Bao Shujing, said at a conference in June that auctions planned for later this year would see 10 or fewer blocks go under the hammer, not the previously anticipated 23. The auctions would also be held later than anticipated, said Bao, at the end of the year at the earliest.
Tempting reserves
The life spans and production cycles of shale gas developments are longer than those for conventional natural gas, at between 30 and 50 years.
Stable production from an average single shale gas well, however, is only between 20,000 and 200,000 cubic meters per day, a far cry from the several million cubic meters yielded by conventional natural gas wells every day. Despite this, shale gas wells cost much more to develop.