Natural gas in China: Shale game | The Economist

Aug 30th 2014 | From the print edition

IN 2012 China’s main planning agency, the National Development and Reform Commission, declared that the country would produce 60 billion-100 billion cubic metres of shale gas a year in 2020. It needed those forecasts to be accurate.

They weren’t. Wu Xinxiong, the director of China’s National Energy Administration, recently predicted that only 30 billion cubic metres a year will come on stream by 2020. That would barely meet 1% of China’s energy needs now, let alone in 2020.

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This is profoundly disappointing. With more than 30 trillion cubic metres of recoverable shale gas, China has the largest reserves in the world, almost 70% more than in America, home of the shale-gas revolution. It is also a setback to the country’s efforts to reduce pollution. Dirty coal now makes up about 70% of energy consumption and, despite fast growth in renewable energy, gas is the only cleanish energy source that could displace enough coal to rein in carbon emissions quickly.

China has found that replicating America’s shale strategy—even with American help—is harder than it expected. Fracking works by injecting millions of gallons of water, sand and chemicals into horizontal wells at high pressure, fracturing the shale and releasing gas. American shale seams are mostly found in easily accessible areas at quite shallow depths, and formed of rock that is easy to fracture. China’s are mostly deeper, often in inhospitable areas, and made up of rock that resists American fracking techniques. Worse, some of the biggest reserves are in regions, such as Sichuan province, that have been convulsed by seismic activity or are short of water, making fracking even tougher.

China’s two biggest state oil companies, Sinopec and China National Petroleum, have been fracking furiously, but so far only Sinopec has a commercially significant shale-gas project up and running, in Sichuan’s Fuling district. It claims the field will yield 5 billion cubic metres next year, compared with just 200m cubic metres of shale gas produced nationally in 2013. Few other large shale fields are set to come online, while other natural-gas projects have missed their production targets.

Hardly surprising, then, that in May China signed a $400-billion deal with Russia’s Gazprom to import 38 billion cubic metres of natural gas a year over the next three decades. That gas, figuratively if not yet literally, really is in the pipeline.

via Natural gas in China: Shale game | The Economist.