China lays claim to world's largest shale gas reserves
China has the world's largest shale gas reserves according to the Chinese Ministry of Land and Resources.
But it will take some time and technical expertise to extricate the unconventional resource. In addition, there would likely be geological commercial challenges in its shale gas sector.
That means development in the current decade would likely be modest. China has yet to produce any shale gas commercially.
In its first official estimate of shale gas reserves, the ministry said last week that the country holds 25.08 trillion cubic meters of technically recoverable deposits, citing a preliminary survey.
This would place China at double the shale gas reserves held by the U.S.
The latest Chinese survey, which didn't cover the remote Qinghai and Tibet regions, also estimated China's total shale gas deposits in place at 134.42 trillion cubic metres.
Shale gas, tightly trapped in rock formations, has been a game changer in the U.S., where advances in production techniques - namely, the hydraulic fracturing technology and horizontal drilling - have ended US dependence on gas imports.
Interestingly, the US has revised down its technically recoverable holdings to 13.8 trillion cubic metres.
However, the government is determined to catch up. It is hoping to repeat the economic success of shale gas development in the U.S. to address domestic consumption expected to triple to 300 billion cubic meters in the decade ending 2020.
Gas is a key plank in government efforts to curb pollution from coal burning. It has offered subsidies and raised the prices companies can charge for shale gas to encourage domestic exploration and development.
State-owned energy producers are also being encouraged to buy into foreign shale assets to gain technological know-how.
Yu Haifeng, deputy director of the land ministry's geological exploration department, said the focus through 2015 will be on exploration-related activities. In the ensuing five years, he said, the focus will turn to the "rapid development" phase.
"We are just getting started, and our exploration technology lags far behind advanced countries," Yu told a press briefing in Beijing last week.
He added that China's shale gas output could reach 100 billion cubic meters by 2020. If that eventuates, the fuel will become an integral part of China's energy mix.
The National Development and Reform Commission, China's top planning agency, has set a goal of pumping 80 billion cubic metres of shale gas by 2020, though how this target would be met was not explained.
However, the State Council, or the Cabinet, at the end of last year designated shale gas as an independent mineral. By separating it from conventional hydrocarbons, the ministry clearly is hoping to attract more players into a shale gas sector now dominated by several state-owned energy giants.
The designation "legal mineral" opens the door to production-sharing contracts with foreign oil and gas companies for shale gas for the first time.
Notably, Royal Dutch Shell Plc and Chevron Corp are the only two foreign companies to have signed agreements with PetroChina on shale gas exploration in China.
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