China to Increase Shale Gas Production


China plans to increase its shale gas production from 1.3 billion cubic meters of shale gas per year to 30 billion cubic meters per year by 2020, according to Chen Weidong of China National Offshore Oil Corp. This goal is significantly less than the 60 to 80 billion cubic meter goal set in 2012, when the Chinese government declared it would start extracting its reserves, which are the largest in the world. The goal was reduced because of difficult drilling conditions.

Though China became the second largest shale gas producer in 2014, it will likely have to increase its reliance on imports over the next few years because demand is growing faster than production. “Last year, the import dependency was about 31 percent. By 2020 that dependency will go up to 40 to 50 percent,” said James Henderson, senior research fellow at the Oxford Institute for Energy. “We’ll get the supply from Russia and also [from] Turkmenistan. We’ve already got secured supplies for over 400 billion cubic meters for 2020.” Turkmenistan supplies nearly half of China’s gas imports.

As part of its efforts to increase production, China drilled 200 new wells in 2014, bringing its total to 400. According to Chen, China will add “a few hundred a year for sure. No problem.” However, it may not be as simple as drilling more wells. “China has the biggest potential,” Henderson said. “But it’s one thing to have the gas [and] another thing [to contend with] rocks, fractions, and reservoirs [that affect] access to water. China has a massive water shortage.” Drilling and hydraulic fracturing use a lot of water, and most of China’s shale gas reserves are located in arid parts of the country.

Despite these and other impediments, China continues to pursue an increase in shale gas production to not only reduce its reliance on coal, which accounts for nearly 70 percent of its energy consumption, but also to combat unhealthy levels of pollution. The capital of Beijing is often under smog alerts and many people have taken to wearing masks. There is even a Twitter account called BeijingAir that tweets updates several times a day on the smog levels. On Friday, February 13, it was “hazardous.”

High levels of pollution in Beijing have led to serious health problems. “Over the past 10 years, lung cancer in Beijing has increased 45 percent. So everybody knows that the first challenge for energy is a sustainability issue,” Chen said. “We have the ‘Beijing cold.’ People go to the hospital, but medicine is no use, so they leave Beijing and stay for a few months outside [the city] to get better. That’s the Beijing cold.”

For more information on shale gas production in China, click here, here, and here.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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