China eyes tech breakthrough before shale gas leap

The following story is a must read for those interested in fully understanding China’s current situation for unlocking its vast wealth of shale gas.

BEIJING – (Source: National Post) China wants to identify the right technology to unlock its potentially large shale gas resource in the next few years, aiming for a leap in shale production by 2020, two years after it embarked on a search of the unconventional fuel.

Top energy agency, the National Energy Administration (NEA) officially unveiled on Friday a target to produce 6.5 billion cubic metres (bcm) of shale gas by 2015, or roughly 6% of China’s current total gas production.

But it intends to dramatically boost output to 60-100 bcm in 2020, a level some experts say is over-ambitious as it faces techonological, environmental and regulatory roadblocks.

“The U.S. technologies may not be fully applicable in China’s shale gas formation, they need to be revamped,” Zhang Yuqing, NEA’s head of Oil and Gas Department, said.

“The main task in the 12th five-year period is to lay a good foundation, especially some key technologies in shale gas exploration and development.”

China started the shale push in late 2009, inspired by a shale boom in the United States. Its state energy firms have since then entered multi-billion-dollar shale deals in the United States with Chesapeake Energy and Devon Energy Corp.

At home companies have drilled several dozens of wells and brought in firms such as Royal Dutch Shell, Chevron Corp and Hess Corp for joint studies.

But China has yet to start commercial shale production, though it is widely believed to hold the world’s largest shale resource.

The Ministry of Land and Resources revealed early this month China may hold 25.08 trillion cubic metres (tcm) of potentially recoverable shale gas resources. That compared to a U.S. Energy Informationa Agency’s forecast in March 2011 at some 36 tcm.

NEA’s Zhang said foreign firms can enter product sharing contracts with Chinese firms or provide engineering services.

Shell, which has done more exploration works in China than the rest of foreign firms – having drilled an estimated five wells in the southwest Sichuan basin, has yet to land a PSC contract with partner PetroChina 0857.HK, an industry executive has told Reuters.

China aims to complete an evaluation of national shale gas resource potential, make shale gas technology improvements, and localise the manufacture of major equipment by 2015. It will also establish industry standards and perfect government policies, according to the NEA plan.

Exploration will focus on finding 600 bcm of proven geological shale gas reserves and 200 bcm of recoverable deposits by 2015.

Read the full story.

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