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China looks to shale gas for weaning itself off imports

Reuters

Workers inspect a natural gas facility of Sinopec at its Dongsheng gas field in Erdos, Inner Mongolia Autonomous Region, China, in October 2018.

ReutersSINGAPORE/BEIJING (Reuters) — China aims to slash its growing dependence on gas imports by boosting domestic projects like shale fields as the security of its energy supply comes under the spotlight amid a festering trade war with the United States.

The row with Washington has overshadowed China’s economy, likely slowing gas demand growth considerably this year, a new government research report shows. But Beijing is funding new efforts to boost domestic production, particularly from so-called unconventional sources like shale gas, as weaning China off its import reliance takes on new importance.

The report, released Saturday by the oil and gas department at the National Energy Administration (NEA) and a State Council research arm, calls for boosting natural gas production in key resource basins in the southwestern province of Sichuan, the Erdos basin in the north and offshore China.

According to the report, China’s gas consumption will rise by about 10 percent this year to 310 billion cubic meters (bcm), and to continue growing until 2050. Though slowing from last year’s 17.5 percent, 2019’s growth still represents an annual addition of 28 bcm, faster than the annual average growth of 19 bcm during 2007-2018, the report said.

While China imposed tariffs on imports of liquefied natural gas (LNG) from the United States starting last year, it remains the world’s second-largest buyer of the super-chilled fuel.

“China’s reliance oil and gas imports is growing too rapidly, with oil topping 70 percent and gas moving towards 50 percent,” said Lin Boqiang, Director of the Energy Economics Institute at Xiamen University.

The NEA report calls for building the Sichuan basin into the country’s top gas hub due to its rich resource base in both conventional gas fields and unconventional resources, such as shale gas and “tight gas,” a low-permeability gas derived from reservoir rocks and costly to develop.

“Through expanding development of deep-reservoir gas, tight gas and shale gas, Sichuan is likely to account for about a third of the country’s total natural gas output,” the report said, up from 20 percent currently.

Shale gas in Sichuan, the key region for China’s still fledgling shale gas development, could overtake conventional gas in output, the report added.

In a separate report carried by official news agency Xinhua on Saturday, Zhao Wenzhi, an influential researcher at China’s Academy of Engineering forecast that China’s shale gas output could reach 280 bcm, or 23 percent of the country’s total gas output, by 2035. Zhao also serves as president of Exploration and Production Institute at state giant PetroChina.

China last year produced about 10.9 bcm shale gas, less than 7 percent of the nation’s total gas output at 161 bcm.

The leap in projected shale gas output would require companies drilling over 500 wells a year between 2019 and 2035, double the 2018 level, Zhao was cited as saying.Speech

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