Chinese shale gas industry is about to enter its booming years, made possible by China National Petroleum Corp and Sinopec Group. These two oil and gas companies enabled the nation’s shale output to hit 200 million cubic meters in 2013.
Shale gas production in China is expected to reach 1.5 billion cubic meters this year. China has made significant breakthroughs in the unconventional oil and gas exploration sector.
In 2013, at the Chongqing Fuling shale gas block Sinopec averaged single well output of 150,000 cubic meters per day. The company is hoping to reach an annual production of 1 billion cubic meters by the end of this year.
CNPC has commercialized shale gas output of 70 million cubic meters from Changning-Weiyuan block in Sichuan province, Zhaotong block in Yunnan and the Fushun-Yongchuan block in Sichuan. Based on the current development level these Chinese companies have managed to achieve will help increase domestic shale gas capacity.
However, there are analysts who are not so upbeat about the future. China is expected to consume nearly 170 billion cubic meters of natural gas in 2014. And even if the country manages to accomplish the goal, all the production cannot be used for society as it requires well-developed pipeline infrastructure and other supporting facilities.
Low utilization rate and issues in upstream exploration will hinder the industry’s forward march.
The greatest hindrance is the lack of a method that can be used for most shale gas blocks in China. For instance, Sinopec’s technology for the Chongqing Fuling block cannot be used for other blocks.
Other major concerns include groundwater exploitation and contamination. Furthermore, China’s geological conditions are very different from those in the US- world’s biggest shale gas producer.
Majority of the shale gas blocks in China are in mountainous regions, which makes it extremely difficult to bring in huge fracturing equipments necessary to extract gas.
Shale gas exploration requires huge quantities of fresh water and technology available at present hasn’t been able to address this issue. Fresh water once used in shale gas extraction can’t be cleared for residential use and removing fluids from reservoirs can lead to surface subsidence.
Majority of the shale gas blocks in China are in mountainous regions, which makes it extremely difficult to bring in huge fracturing equipments necessary to extract gas.
Shale gas exploration requires huge quantities of fresh water and technology available at present hasn’t been able to address this issue. Fresh water once used in shale gas extraction can’t be cleared for residential use and removing fluids from reservoirs can lead to surface subsidence.
These challenges have been limiting the growth of the shale gas industry. Companies are also reluctant to carry out operations in blocks they won from the bidding.
Drilling a well can cost around 100 million yuan, which still cannot assure that shale gas will be found. Thus, the high cost and the inherent risks in shale gas exploration have deterred Chinese companies from making any big moves. The reluctance of the companies has also prevented any further bids.
China’s shale gas boom, however, has brought about opportunities for some machinery manufacturers. For instance, Yantai Jereh Oilfield Services Group Co Ltd has been trying to manufacture fracturing equipment suitable to China’s geological contours. This company is the only Chinese firm to supply shale gas equipment to North American companies. Jereh, recently, started developing machines meant specifically for Chinese projects. Their equipments can be used in areas with poor roads and uneven land.
China’s shale gas boom, however, has brought about opportunities for some machinery manufacturers. For instance, Yantai Jereh Oilfield Services Group Co Ltd has been trying to manufacture fracturing equipment suitable to China’s geological contours. This company is the only Chinese firm to supply shale gas equipment to North American companies. Jereh, recently, started developing machines meant specifically for Chinese projects. Their equipments can be used in areas with poor roads and uneven land.
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