Friday , 23 March 2018

Mountainous Terrains Threatening to Derail China’s Shale Gas Dreams


China’s hope of turning the findings of shale-gas reserves with its territory into the next revolution in the energy sector on a global basis is running the risk of running aground because of unseen challenges. The government planners in Beijing are finding it exceedingly difficult to meet the ambitious targets they had set for themselves because of factors beyond human control. The fact that most of the shale-gas reserves theorized to be recoverable within China’s territory lies in the mountainous regions in the west of the country. Thus, the dream of turning China into the global exporter of shale-gas and a leading player in the lucrative energy trading market may remain just a dream. 

The situation was radically different even a couple of years back when the National Energy Administration of China had projected the domestic production of shale-gas will rise drastically in the next decade or so. In fact, Chinese authorities had estimated in 2012 that the country would be pumping shale-gas in the region of 60 to 80 billion cubic meters (BCM) per year by circa 2020. This would have produced a significant amount of influence on the global trading and price of shale-gas in particular and energy prices in general. However, realization has dawned on the improbability of meeting this target because of which China’s present energy chief, Wu Xinxiong, have slashed the goal of domestic production of shale-gas by half. Therefore, the official target set by China now stands at 30 billion cubic meters by the year 2020.

There is no doubt however on the minds of experts and various agencies working in this field regarding the prospect and potential that China holds in bringing about a energy revolution through greater exploitation of its formidable shale-gas reserves. In fact, the U.S. Energy Information Administration estimates that China holds the largest reserves of the shale-gas that is theoretically recoverable on the planet. However, there is a caveat in the form of the location of much of these reserves, which lies mostly in the mountainous regions of western china that poses formidable challenges because of inhospitable terrain and lack of infrastructure.

The lack of realization is set to hurt China as much domestically as its ambition to dominate the energy trading and export market in the decades to come. This is because of the rapid urbanization that the country is going through at the moment. The rise in the number and immensity of the urban centers, as well as, the movement of its population from the traditional hinterlands to these cities is giving rise to a mammoth increase in energy demands. Therefore, China requires a ready source of fuel to feed its engine of rapid modernization and urbanization, which may otherwise screech to a deafening halt. Thus, the meeting of the target in domestic shale-gas production is of utmost importance to the Chinese authorities and planners.

China wants to emulate the United Sates in the way it has carried out its very own shale-gas boom, which is all set to turn that country into a net fuel exporter compared to being one of the largest importer of fossil fuel in the world. However, there are several key differences between the scenarios under which the shale-gas revolution has taken place over there. The most important factor is the geographical location of most of the major shale-gas fields in the U.S., which have had the good fortune of having them in fairly accessible regions such as the flatlands of Texas, North Dakota, and Pennsylvania.

Thus, United States has been able to benefit from the exploitation of its shale-gas reserves without having to put much investment into putting into place adequate infrastructure. Moreover, United States is way ahead as far as expertise in exploiting the reserves, and innovation in the field of cutting-edge exploration technology is concerned. China still has a lot of catching up to do before it can rely solely on indigenous technology for shale-gas exploitation.

In spite of making so much noise regarding the setting up of ambitious targets, and bringing about a shale-gas revolution, the Chinese authorities have been able to identify only a single field with promising shale play. The field in question, and on which much of China’s hope lies at the moment for meeting even its curtailed domestic production target, is the Fuling shale gas filed located near the bustling megalopolis of Chongqing. This place has a more famous association with the past when it served as the site of River Town, first book of the well-known journalist Peter Hessler. This book chronicles the years that the author spent as part of the Peace Corps volunteer while he was in this the-then small city on the river Yangtze.

The Fuling shale gas filed has the benefit of location, which is near a major urban center, and holds much promise for the future. The field is under the control of Sinopec and is all set to contribute a major share to the target set by the authorities regarding annual production come circa 2020. In fact, according to the authorities, this field will have an annual shale-gas production in the region of 5 BCM by as early as 2015, which will go up to 10 BCM by 2017. However, the government has not provided any clear-cut indications regarding the source from which they are going to produce the rest of the shale-gas as per their target estimates. This amounts to a considerable quality of 20 BCM, and will require setting up of a number of major field to meet this target.

The state-owned Sinopec is currently at the forefront of all developmental activities related to the exploitation of shale-gas reserves, and its allied infrastructural requirements. However, two foreign companies, Royal Dutch Shell and Hess, have made forays into this potentially lucrative field by securing production-sharing contracts for some of the other potential sites. Thus, the foreign majors can help the process by sharing their expertise, and bringing to reality the ambitious role China intends to play in the Shale-gas sector. 

by Redacción Gas Shale México

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