China shale gas development returns to reality

If we look at the reserves of shale gas alone, China is considered to be the world’s largest “shale gas giant” and its reserves may be about twice that of the United States. However, in fact, state-owned enterprises have just started production of shale gas in Chongqing and other places in mainland China. Moreover, the Chinese government has suddenly lowered its shale gas production target by 2020 by half. From this point of view, China seems to be waking up from the shale gas development dream and gradually moving from impractical to facing reality.

Looking for shale gas in China

In the Fuling District, about a 3-hour drive from downtown Chongqing, state-owned China Petroleum & Chemical Corporation (Sinopec) is advancing shale gas development. According to the Fuling District, only about 29 shale gas wells have been excavated in Jiaoshi Town in this area. By February this year, 16 wells have already started production. However, details are still difficult to know.

“What are you looking for?” when we were looking for a shale gas well in a village in the mountains, a man suddenly appeared in standard Mandarin. In Chongqing, where the dialect is heavy, it is rare to hear people speak Mandarin. So, we asked in reverse: "You are Sinopec staff?". The man did not answer, but repeatedly pressed and said, "Let's leave."

We finally found a shale gas well. A drilling rig with a height of several tens of meters was erected along the well, and the workers of Zhuo Seng who wore scarlet work clothes worked intensively. On the slopes of the mountains are patches of corn, and the sound of mechanical operation sounds like a quiet village.

In the world, the development of shale gas with U.S. as the center is causing great changes in the energy supply structure, trade, and industry. This is the so-called "shale gas revolution." In order to ensure a stable supply of energy, China also dreams of setting off a similar revolution in the country. However, when China started to develop related technologies, it discovered that the reality faced was becoming more and more severe. The production target is reduced to less than half. In August of this year, the head of Wu Xinxiong of the National Energy Administration of China stated that China’s shale gas production target for 2020 was 30 billion cubic meters, and the department had proposed to produce shale gas by 2020 in 2012. Increase the majestic goal of 600 to 100 billion cubic meters. Only two years later, the production target will be reduced to less than half.

The biggest obstacle to China's shale gas development is high costs. The cost of shale gas development in China is considered to be three to four times that of the United States. The main shale gas reserves are concentrated in the mountains and the terrain is very complicated. In addition, even in the mountainous areas such as Jiaoshi Town, there are many agricultural lands and farmers live there. Therefore, it is difficult to expand the scale of development as much as the United States. In addition, China's shale layer is deeper than the United States, which increases development costs.

In addition, for the chronic water shortage in China, how to solve the problem when using shale gas is also a headache. Even with the introduction of advanced shale gas extraction technology in the United States, it is difficult to solve all problems at once because of the difference in geology and terrain.

In fact, when China put forward unrealistic production targets two years ago, it was already clear that these problems existed. Analyzed Takehara Michihara of Japan's Oil and Metals Mineral Resources Agency (JOGMEC), who is familiar with China's energy situation, saying that “it is estimated that after actually starting mining, it is reduced to a more realistic and practical target”.

China will become the largest natural gas consumer

According to the International Energy Agency (IEA), China's natural gas consumption will double in the next five years and become the world's largest consumer. Even if China's domestic shale gas production increased from 200 million cubic meters in 2013 to 30 billion cubic meters, its supply is less than one-tenth of the consumption.

In order to replace the coal that pollutes the atmosphere, and 60% need to rely on oil imported from the Middle East and other overseas markets, China is stepping up to ensure the source of natural gas. Although the development of domestic shale gas resources is considered to be a key measure to reduce related energy imports, we have not heard the horn of China's “shale gas revolution” at least from the development front in Chongqing.