China’s Shale Gas Potential



By John Richardson

THE shale-gas revolution, which, of course, is already well underway in the US, could also have major implications for petrochemicals in China.

China has 1,275 trillion cubic feet of recoverable shale-gas reserves, according to the Energy Information Administration – more than the US.

As a result, the Chinese National Energy Administration has commissioned a development plan for shale gas.

However, a new report by Deloitte says that:

*The emergence of a major shale gas industry in China would create a struggle for water rights with farmers.

*There are technological constraints and China has traditionally not been very open to inviting-in the international oil and gas companies that own technologies for unconventional exploration and production.

*Coal accounts for 70% of China’s electricity needs, whereas natural gas accounts for only 4%. Even though natural gas emits less CO2s than coal, Deloitte believes it is unlikely that China will stray too far from coal for power generation, as most of its modern coal-based electricity plants have been built over the last five years.

Nevertheless, the consultancy adds that China is becoming more open to doing deals with IOCs in order to get hold of hydraulic fracturing technology. Although Shell is the only company to have signed a deal to exploit the country’s reserves, negotiations are taking place with ExxonMobil, ConocoPhillips, Chevron and Halliburton, adds Deloitte.

Developing shale gas could also, in the long run. prove cheaper than importing liquefied natural gas (LNG) from Qatar, Australia and Russia, says the consultancy.

Doubts have similarly been expressed over the extent to which China will be able and willing to exploit its coal reserves in order to make transportation fuels and chemicals.

But where there is a will to improve energy security, China is likely to find a way.

The coal-to-chemicals story, and the threat that it represents to companies planning new projects based on exporting to China, is already well-documented.

What if China was to also exploit its shale-gas assets to such a degree that it was left with lots of surplus, and therefore very cheap, ethane, propane and butane?

Right now, this might seem many years away, but never underestimate China’s ability to step-up the speed of its investments.

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