Natural Gas by Michael J. Bradshaw & Tim Boersma

Author:Michael J. Bradshaw & Tim Boersma
Language: eng
Format: epub
ISBN: 9781509542857
Publisher: Wiley
Published: 2020-07-27T00:00:00+00:00

Shale gas with Chinese characteristics

To date, natural gas has played a modest role in China’s national energy mix, accounting for 7.4 per cent of primary energy consumption in 2018. By comparison, coal accounted for 58.3 per cent, and on average, in the OECD, natural gas accounts for 26.6 per cent of primary energy consumption. As ever, given the scale of China, percentages can be misleading. In 2018, China produced 161.5 bcm of natural gas, accounting for 3.8 per cent of global production, ranking it sixth overall. However, the tide has clearly turned in China, which has embarked on a dash for gas as it seeks to reduce urban air pollution and reduce the carbon intensity of its economy. According to BP data, gas demand in China grew by 17.7 per cent from 240.4 bcm in 2017, to 283 in 2018. This accounted for 22 per cent of global gas consumption net growth.

In the EIA’s estimates, China ranked first in the world with 31.6 tcm of technically recoverable shale gas resources. China’s Ministry of Land Resources has published a lower resource estimate of 25.1 tcm.58 Nonetheless, there would seem to be a substantial amount of shale gas in place in China; the problem is that the rocks are heavily faulted, the shale is deep (below 3,500 metres) and it is often found in mountainous, remote and arid areas (or areas where there is competition for water) that present significant logistical challenges. Despite these challenges, the Chinese government has made shale gas development a national priority, and in 2012 set a target of 100 bcm/year of combined tight gas, coal bed methane (CBM) and shale gas by 2020. In the face of slow progress, the shale gas target was subsequently reduced to 30 bcm/year, with a target of 80–100 bcm/year by 2030; nevertheless, there is clearly strong political support for shale gas development in China.59 This has only strengthened as a result of the trade frictions with the US, and in late 2019 a research report from China’s National Energy Administration suggested that the pace of gas demand growth would slow to around 10 per cent, as a result of slower economic growth and the pressures on gas infrastructure, and that efforts would be stepped up further to increase domestic output, including shale gas, tight gas and CBM.60 The Chinese gas industry is dominated by the NOCs, particularly CNPC and Sinopec. These companies dominate domestic conventional production and control most of the long-distance pipeline networks. The best prospects for shale gas development are currently in the Sichuan basin, which is already home to conventional oil and gas production. The Chinese government did open up shale blocks to non-NOCs in 2011–12, but the companies that won licences do not have the experience or the financial clout to undertake a significant drilling programme. Consequently, CNPC and Sinopec are leading the industry in Sichuan.

At present, China’s natural gas market needs reform, and significant investments in infrastructure. Natural gas prices are set by the central government, with some intervention at the provincial and city level.

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