The 17-23 February Issue of ICIS Business News featured an article on China’s potential to become a major producer of hydrocarbons using hydraulic fracturing of shale. It is well known that China has large shale deposits, actually estimated to have more recoverable gas than those in our country. If these are developed, the world energy scenario would again change, with China potentially a low cost energy country, depending on coal and natural gas. If the gas contains liquids, China’s petrochemical producers would make low cost ethylene as well. And the country would become a “cleaner” electricity producer as new power plants use gas instead of coal – desperately needed due to the intense pollution caused by coal burning. But there are substantial difficulties facing China as it starts to plan its future in shale gas production.
Shale wells require a considerable amount of water, which is already scarce in many parts of China. So water for fracking will have to compete with agricultural, commercial and domestic users. Secondly, China’s shale gas is generally found at much greater depths and less favorable formations than in the U.S. This greatly increases drilling costs and makes gas production more problematic in some areas. Third, there is already a great deal of antagonism in China about all types of pollution. Fracking is therefore likely to be strongly opposed in many municipalities as it is in Europe and parts of the states. Finally, fracking in different types of shale requires a great deal of experience and inventiveness, including massive investments in reservoir mapping, including 3DSeismic, CT scanners and advanced imaging solutions. So, there is a considerable learning curve in China even if technology is brought over by Western firms, which is happening to some extent, but with concern about lack of protection for sophisticated technology.
Petrochina and Sinopec are already engaged in exploratory fracking, as are foreign companies like Shell and Total.
All in all, it is is estimated that it will be ten years before China can become a large producer of shale gas. This will, among other things, require the government to set up rules to regulated the licensing, exploration and production involved in establishing China’s hydraulic fracturing industry for shale development. In China, the ground below the surface belongs to the state, a far different situation than in the U.S.