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Page added on November 9, 2014
China Unlikely to Become Shale Gas Superpower
China is estimated to hold the largest technically recoverable shale gas reserves globally, yet extracting it is too complicated and costly to replicate the US shale gas revolution.
China, the largest energy consumer in the world, hopes to become less dependent on energy imports. However, Beijing needs to increase its domestic volumes of energy resources in order to sustain its growing economy. Concomitantly, China has to address the environmental implications of using coal. Shale gas extraction is seen as a viable substitute to alleviate such problems as evident from the US experience. The United States, once dependent on energy imports, has been transformed into a major energy superpower following the shale gas revolution.
In 2013, the US Energy Information Administration issued a report stating China has 1,115 trillion cubic feet of shale gas, twice as much as the US. It singled out seven prospective basins with abundant shale gas and shale oil reserves the country could develop.
But despite enormous resource potential, China so far has not managed to replicate the US success. The Chinese shale industry has not been developing as fast as Beijing hoped. China is “working diligently to provide an investment environment conducive to shale development, but given rising domestic demand and a challenging exploration environment, it is unlikely to become a shale exporter,” Deloitte said in a 2013 report.
The primary reason for that is geology. In China, the formations holding shale gas are located in challenging mountainous terrain. Moreover, those areas, primarily in the north of the country, lack the needed water resources, meaning the reserves are difficult and expensive to extract. By comparison, in the US shale gas is mainly extracted in the flatlands of Texas, North Dakota, and Pennsylvania, where there is abundant supplies of water required for hydraulic fracturing.
Further complicating the issue is the fact that a few state-owned Chinese companies control much of the gas and pipeline infrastructure in the country. Besides, shale gas extraction employs sophisticated drilling technology used to inject water and chemicals into the rocks so that the gas can be freed. China does not have the know-how to extract the gas and largely depends on foreign technology in the field.
In 2012, China’s National Energy Administration (NEA) projected that by 2020 the country would receive from 60 to 80 billion cubic meters (bcm) of domestic shale gas annually. In August, Wu Xinxiong, NEA’s chief, announced the target was reduced to 30 billion bcm considering the challenges of shale gas extraction. “The previous targets were more of a vague prospect, a hope. 30 bcm is a more realistic goal,” an unnamed government source told Reuters.
Thus far China has identified only one prospective shale gas field, Fuling in Sichuan province. It is projected to produce 10 bcm annually by 2017, according to Sinopec, the state-owned corporation developing the well. “This marks an important strategic breakthrough in China’s shale gas development and signifies the country’s earlier-than-expected entry into the large-scale commercial development phase. This encouraging progress will play a significant role in accelerating the structural adjustment of China’s energy industry, relieving pressure on natural gas supplies from central and eastern China, and promoting energy conservation and emission reduction, as well as air pollution control,” Sinopec stated in a press release.
But China still has to produce an additional 20 bcm to meet NEA’s reduced target for 2020. Yet no other shale gas fields are developed at the moment.
“The ‘shale gas revolution’ that swept across the U.S. is unlikely to be repeated in China by 2020, particularly because of water scarcity and land rights bottlenecks. China should be realistic about its shale development outlook and commit to take effective actions to address the various environmental, technological and regulatory challenges,” analyst Ella Chou stated in 2013.
Anthony Fensom echoed such sentiment in an article published in the National Interest: “The United States took two decades to achieve its “overnight” success in shale gas. For China, the shale revolution will not be delivered any more quickly, making imported LNG crucial until its shale industry picks up speed.”
Dissatisfied with the current progress on shale exploration, Chinese authorities have imposed fines on companies, including Sinopec, for failing to fulfill their commitments, Forbes reported November 4.
15 Comments on "China Unlikely to Become Shale Gas Superpower"
eugene on Sun, 9th Nov 2014 8:42 am
Actually, it took the US 60+ yrs to achieve shale success. And what it took was higher priced oil. We already had the technology. And the “success” will be short lived. No pumping a well for 40 yrs as in days of yore. But when you’re scraping the bottom of the barrel, anything will do.
JuanP on Sun, 9th Nov 2014 8:58 am
Russia and China have just signed another gas mega deal, only slightly smaller than the previous one. The Western Siberia Altai pipeline has been agreed by President Vladimir Putin and President Xi Jinping. The previous deal was for 38 bcm and this one is for 30 bcm. The total annual Russian gas sales to China will be 68 bcm. This is one of the largest business deals in human history. China is now oficially Russia’s largest customer. The big loser here is Europe. This are 30 year deals, the Europeans will never ever see a drop of this gas now. This pipeline will divert gas that would have gone to Europe otherwise.
I think the Europeans will regret having succumbed to US pressure in the Russian-American War. It is only a matter of when. I wonder if the USA will keep this up until Europe and the Euro are totally destroyed, that seems to be one of the goals.
With this deals Russia and China further cement their strategic economic, political, and military partnership. The Presidents signed 17 bilateral deals, all to be paid in Renminbi and rubles. This will strengthen both countries relative positions in the world significantly.
Kenz300 on Sun, 9th Nov 2014 10:03 am
China is investing in a variety of energy sources.
They have huge investments in wind and solar power and now are looking to geothermal.
————————–
China Turns to Geothermal Energy To Tackle Carbon Emissions
http://www.renewableenergyworld.com/rea/news/article/2014/09/china-turns-to-geothermal-energy-to-tackle-carbon-emissions
Boat on Sun, 9th Nov 2014 10:09 am
To put these deals in perspective Mexico imports about the same amount of nat gas, most of it from the US. Many other pipelines from the US are being built and are in the planning stages.
synapsid on Sun, 9th Nov 2014 11:46 am
JuanP,
Check Bloomberg Business Week for November 6, an article on Chinese activity in Central Asia (“Silk Road”), particularly Kazakhstan and Turkmenistan.
China is able to make use of the less than warm feelings for Russia among former Soviet republics in Central Asia, especially the ones with lots of NG.
Jeff p. on Sun, 9th Nov 2014 12:13 pm
The Russian shift of gas exports to China
will not be dependable for two major reasons: 1) the Russian economy is not sufficient to maintain exports; and 2)China’s economy is dependent on trade with the West.
rockman on Sun, 9th Nov 2014 1:35 pm
Did anyone else note the article repeated confuses the shale GAS revolution with the shale OIL revolution? For instance there has never been a shale GAS boom in North Dakota. And finally:
“The United States, once dependent on energy imports, has been transformed into a major energy superpower following the shale gas revolution.” Once dependent??? Not only is the US still dependent upon oil imports the country is still a net NG importer despite the boom in the Marcellus. That may or not change in the future but at this time the US does not produce as much NG as we consume.
Northwest Resident on Sun, 9th Nov 2014 1:46 pm
I’m pretty sure the USA was a “major energy superpower” before the “shale gas revolution”, and still will be after the “shale gas revolution”. Just because we waste so much of our fossil fuel energy on happy motoring, long and frequent commutes back and forth to work, to McD’s and to a million other places, etc… doesn’t change the fact that America still produces enough fossil fuel energy to be labeled a “major energy superpower”.
America stands out as the NUMBER ONE “major energy wasting superpower”!!!
I feel such a surge of intense flag-waving patriotism over that fact. Makati1, are you reading this?
rockman on Sun, 9th Nov 2014 2:43 pm
NR – “I’m pretty sure the USA was a “major energy superpower”. Again they use such a phrase which isn’t defined and thus means whatever a person thinks it means. Which results in it meaning nothing IMHO. Are we a superpower because we consume so much energy or because we can produce so much more energy then we consume? Is a company that makes $100 million/year a financial superpower if they have to spend $120 million/year to meet the interest on the company debt?
Or maybe another definition: can we use our energy status to influence other countries by threatening to withhold energy supplies and thus be a superpower as our nuclear arsenal makes the US a military superpower? Actually we could in one aspect: exports of refined products since the US is a major global supplier. But I’m not sure how the gov’t could do it for any meaning length of time without doing severe damage to the domestic refinery industry.
Phrannque van Kennen on Sun, 9th Nov 2014 3:32 pm
For the first 70 years or so of the oil era, the USA was THE undeniable oil superpower, producing enough cheap oil to make all major navies shift from coal to oil, and enough oil to fuel the Allied militaries in both World Wars. Even now, admittedly with higher prices, the resurgence of American hydrocarbon production has reshaped the finances of the modern world. The crashing price of hydrocarbon fuels all over the world is just one small result of this American hydrocarbon renaissance. One can only hope that it will NOT delay our progress toward renewable and non-polluting energy sources. The gas deals between Russia and China are indeed enormous, but for at least a longish while, the Russian economy will remain utterly dependent on European purchases and US and EU technologies. Meanwhile, Europe will continue to make startling progress in renewable energy, as it has learned from the school of hard knocks that Russia is determined to be at best an unstable trading partner, and at worst perhaps a new super- aggressor. While many people see natural gas as a “bridge” to renewable energy, many others point out that it is a terribly potent greenhouse gas that may indeed become more of a problem than a solution. I do not wish to sound like an echo of Pollyanna, but Russia’s moves have been forcing Europe to proceed toward its eventual and inevitable renewable energy independence. China is now caught in a coal trap – I honestly hope that it will not find itself in a natural gas trap of similar power and deadliness. Hydrocarbons will always serve as chemical and industrial feed-stocks, but must not continue to be used massively as fuels. If our race survives for another century or so, the enormous Sino-Russian natural gas deals will probably come to resemble the whaling industry and the ice-exportation business. Phrannque.
JuanP on Sun, 9th Nov 2014 6:29 pm
Phrannque “I do not wish to sound like an echo of Pollyanna, but Russia’s moves have been forcing Europe to proceed toward its eventual and inevitable renewable energy independence.”
And yet, you sound just like that echo you don’t wanna sound like. 😉
I hope Europeans fulfill your dreams. I have a sister and two nephews in Spain, but I think you are wrong. I do recognize the effort Europeans have made, and it is smart and admirable, but it will not be enough.
Europe will be energy independent and stop importing gas and oil at some point, but it will not be voluntary, and it will not be a happy time. All the world will become “renewable energy independent” as we run out of oil and gas exports in the future. I am not looking forward to it.
Dutchman61 on Sun, 9th Nov 2014 6:57 pm
The real reason the US and Canada have exploded with finds is not just the price of oil or the new tech. These are the only countries that left those who own the surface won what is under ground. Almost every other country in the world allows people to own the surface but the government owns what is buried below. It is a huge factor.
Makati1 on Sun, 9th Nov 2014 7:35 pm
The US exported about 660 Billion cubic FEET of NG to Mexico last year.
The Total Russia/China deal is about 68 Billion cubic METERS per year.
660 bcf = about 18.6 bcm. or about 1/4th the China/Russia deal.
http://www.eia.gov/dnav/ng/ng_move_expc_s1_a.htm
http://www.metric-conversions.org/volume/cubic-feet-to-cubic-meters.htm?val=660
That was for Boat.
Makati1 on Sun, 9th Nov 2014 7:38 pm
NWR, I read everything but some of Davy’s long rants. ^_^
Davy on Sun, 9th Nov 2014 7:59 pm
Phran said – China is now caught in a coal trap
You are so right Phran. China will never be able to transition from coal at this point of the paradigm shift to descent. The amount of infrastructure invested through an economy revolving around coal is huge. The amount of people dedicated to mining coal is huge. The amount of power supplied by coal so huge it can never be replaced by AltE or any other FF. China is traped with coal killing itself and the world.
Phran you AltE ideas for Europe will never happen IMHO. There is no time and no money. It is good Europe has what it has now because not much more will be built out in just a few short years. The drop in complexity and economic activity will strike the most complex technologies the hardest and quickest because of liebig’s law. There are so many possible weak links in such a high tech process. These processes will never survive a serious and extended down turn. We are going to be worried about food, water, and shelter with little energy left for shiny technological equipment.
It’s funny some of the most optimistic AltE people are European. I am impressed with what Europe has done in a short time but look where Europe is now and look where the future is. The future is bleak for Europe. I wonder if the Union will even hold together let alone construct a fully renewable society. If there were time and money I would put my money on the Europeans but there isn’t. Reality is a bitch.