China has got a lot of shale gas. To the tune of 1,275 Tcf of technically recoverable shale reserves, by some estimates. But today it is all still sitting in the ground. If that potential is tapped in any significant way, it will have a huge impact on global gas balances, with implications for LNG markets, economic competitiveness and geopolitical clout. But a lot of obstacles must be removed before the promise of Chinese shale gas can be realized. Last week I spoke at the Global Unconventional Gas Summit, held in Beijing. After listening to two days of presentations on the issues, I came away with the view that while some of these barriers are inherent in the Chinese system, probably the biggest barrier is a general misunderstanding of why shale gas developed the way it did in the U.S. in the first place. So today we will provide a small window into the Chinese shale gas initiative and in the process learn something about the real drivers of shale gas development here in the U.S.
A couple of general disclaimers. First, in these RBN blogs we usually don’t get into such big picture, long term, global issues. But since I was immersed in China shale discussions for two days, it seems only right to recap what I got from the conference here. Second, a two day conference does not make you an expert, or even generally knowledgeable on the subject. But that doesn’t mean that I didn’t come away with opinions, so take them as such.
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The 3rd Annual Unconventional Gas Summit was hosted by Gas Technology Institute and China Energy Research Society (CERS). It is an outgrowth of initiatives between the U.S. and China for the transfer of shale technologies, and so there were a lot of speakers from government agencies like China’s National Energy Agency, Ministry of Land and Resources, and Ministry of Science and Technology. But (fortunately) there were also many presentations from China’s “Big 3” National Oil Companies (PetroChina, Sinopec, and CNOOC) and more service providers than you could count. About half of the presentations were in Chinese (with simultaneous translation) with the remainder in English.
These folks have some ambitious objectives. They have plans to get from a standing stop – a few demonstration wells today - to 630 Mcf/d (6.5 billion cubic meters/year) by 2015. It is hard to argue that the Chinese can’t make it happen. The magnitude of growth and progress that I saw across Beijing is phenomenal. Huge new office buildings in every direction, as far as the eye can see. Give the Chinese a five year plan, and the resources are going to be there. And some highly qualified experts from the U.S. side are working hard to get the technology transfer process up to speed.
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