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China shale-gas output 'still years away'

Chinese oil and gas companies are not interested in developing shale gas, which means China is not expected to produce any significant shale-gas volumes for at least five years, former China National Petroleum Corp (CNPC) employee Xiaoyi Mu said

Chinese oil and gas companies are not interested in developing shale gas, which means China is not expected to produce any significant shale-gas volumes for at least five years, former China National Petroleum Corp (CNPC) employee Xiaoyi Mu said.

Now a Dundee University energy economics lecturer, Mu said Chinese national oil companies were reluctant to explore shale gas due the high cost of building a hydraulic fracturing (fracking) industry from scratch, the lack of pipeline infrastructure to take gas from shale basins in the west to demand centres in the east, and low domestic gas prices.

“Shale gas is unlikely to have a significant impact until 2017,” Mu told delegates at the LNG Global Congress. China sits on the largest unconventional gas resource in the world, according to the US Energy Information Administration (EIA), which has estimated the country’s technically recoverable reserves at 36 trillion cubic metres (cm).

Mu added other issues holding back China's shale-gas development included prioritising water use for agriculture and the country’s failure to attract foreign companies with fracking experience. Huge volumes of water are needed for fracking, but the country frequently suffers water shortages.

He also estimated China would need to import between 40-60 billion cm a year (cm/y) of gas by 2015, which is around 30-45 million tonnes a year (t/y) of liquefied natural gas (LNG). The amount imported depends on whether a 68 billion cm/y Russian gas deal is agreed, Mu added.

The first phase of the Russian deal – the 30 billion cm/y Altai pipeline from Western Siberia to northwest China – would reduce LNG imports by 15 million t/y but wrangles over price have seen negotiations drag since 2006.

Mu’s presentation showed Russia wants to sell gas at $11/million British thermal units (Btu) while China would like to buy at $7/million Btu.

China is expected to become a major LNG importer in the next decade, with the country aiming to increase gas consumption and reduce its use of coal.

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