China Shale Gas: Not so fast!

AI-BX567A_CSHAL_D_20121203123606The 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.

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2 Responses to China Shale Gas: Not so fast!

  1. Joe Pilaro says:

    Please do not fall into the position that fracking can only be done using large volumes of scatce water in China, or even in Texas. Development dollars are being spent to use other than water as fracking fluids, including propane, propane/butane mix and even carbon dioxide. There is much promise in the use of CO_2 because it is already being successfully injected into oil wells for enhanced oil recovery. A new CO_2 pipeline is now under construction in Texas for that purpose. China may develop a means to capture CO_2 from coal fired power plants for use in shale gas and oil recovery.

    • Peter Spitz says:

      I am aware that both propane and CO2 are being tested as propping agents. There is concern about propane due to explosion hazards. Carbon dioxide is a good possible alternative to water and may gain broad use. However consider the problem of getting liquid CO2 to thousands of small wells widely scattered in a shale region. Water will always be preferred. And there is the additional issue of carbon pollution to the atmosphere, making this alternative a questionable choice for broad scale fracking. The Chinese will probably figure it out.

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