Businessweek: “In China there’s a giddy feeling that the next energy gold rush is about to begin. Beneath the mountains of Sichuan province, the deserts of Xinjiang, and elsewhere, China contains twice the shale- gas reserves as the U.S., says the U.S. Energy Information Administration. China’s national planners enthusiastically back boosting natural gas production, which accounts for just 4 percent of the country’s total energy mix now. The government wants to double that share by 2015. “There’s a lot of exuberance,” says Zhou Xizhou, who leads the research firm IHS Cera’s China Energy practice. “In Beijing, if you work in energy, you probably receive a shale-gas conference notice every week.”
The impact of a shale-gas boom in China will be enormous, with the potential benefits and likely environmental costs perhaps even greater than in the U.S. So far, though, the output in China has been a trickle because of the challenging geography and the monopolistic structure of China’s oil and gas sector. While about 200,000 of the horizontal wells used in fracking have been drilled in the U.S., China has about 60. China has 1,275 trillion cubic feet of shale-gas reserves, compared with 637 trillion cubic feet for the U.S.
The U.S. shale-gas revolution was launched largely on the flatlands of Texas, North Dakota, Pennsylvania, and other accessible areas. In China’s mountainous Sichuan basin, “the formations seem to be more faulted and folded, which makes it more difficult and less economic to drill long horizontal well bores,” says Briana Mordick, an Oil & Gas Science Fellow at the Natural Resources Defense Council and formerly a geologist at Anadarko Petroleum.
Sometimes the Chinese must cut new mountainside roads to move trucks and equipment to remote sites. With higher upfront costs, “it will be significantly more challenging in China to make the wells pay for themselves,” Mordick says. “The technical learning curve is very steep. What works in one place may not work in another.“
The inflexible structure of China’s state-controlled oil and gas industry hampers efforts to exploit reserves. “In the U.S., it was not the oil and gas majors that started the shale boom” but rather small wildcat operators “willing to accept a high-risk, high-reward proposition,” says Melanie Hart, an analyst on energy policy and China at the Center for American Progress in Washington. “In a market system, you can have many small and large players all specializing in different pieces of the process.””
via China’s Shale-Gas Potential and Peril – Businessweek.
Related articles
- Why the Rest of the World Can’t Keep Up With America’s Energy Renaissance (dailyfinance.com)
- China’s ambitious quest for shale gas (bbc.co.uk)
Linda Yueh is BBC’s chief business correspondent, director of the 
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