By John Kemp
LONDON Jan 17 China will almost certainly fail
to meet its target of producing 6.5 billion cubic metres of
shale gas per year by 2015. Even so, there can be no doubt it is
set to become one of the world's largest shale gas producers
over the next decade.
In its latest annual outlook, published on Wednesday, BP
predicts China will be the most successful country outside North
America in developing shale gas by 2030. Given the country's
enormous shale resources and large prospective market, coupled
with its ready availability of capital and proven engineering
expertise, it is hard to argue with that assessment.
Estimates vary but most analysts put China's technically
recoverable shale resources at around 1,000 trillion cubic feet
(tcf) (28 trillion cubic metres), which would make them the
largest in the world, and about 20 percent higher than in the
United States (862 tcf).
China's Ministry of Land and Resources (MLR) conservatively
puts recoverable shale resources at 886 tcf but the U.S. Energy
Information Administration (EIA) estimates they could be as high
as 1,275 tcf.
Shale formations are also likely to contain crude and
condensates but estimates of the resource have been published.
Deposits are found in six giant sedimentary basins running
from east to west across the country: Songliao in the far
north-east; Bohai and Ordos in the central north; Sichuan to the
south; and Tarim and Junggar in the far northwest (Xinjiang).
All these basins have already produced either coal or oil and
gas from conventional deposits.
The Sichuan and Tarim basins are considered the most
promising for exploration because their thick marine sediments
were laid down on the bottom of ancient seas and have a high
Early development has concentrated on Sichuan because it is
closer to the main populated areas and already has gas pipelines
and other infrastructure from the development of conventional
gas fields in the area.
Most of the basin is located under the provincial-level
megacity of Chongqing and neighbouring province of Sichuan. The
Ministry of Land and Resources has granted PetroChina (in
association with Shell) and Sinopec (in association with Conoco
and Chevron) exploration rights for various blocks in the
Sinopec's first exploratory well, Qianye-1, in the Qianjiang
district of Chongqing, was completed in early 2012 and flowed a
significant amount of gas. Conoco has agreed to drill two more
exploratory wells in Sichuan. Shell and PetroChina are drilling
in their own blocks in Sichuan.
In theory, Chongqing plans to drill between 150 and 200
wells over the next three years, with more across the boundary
in Sichuan. For the moment, however, progress has been very
slow, which will put the target of 6.5 billion cubic metres by
2015, set out in the twelfth five-year plan (2011-2015), out of
The world's second largest economy has made developing shale
a top priority to cut future dependence on imported energy.
Premier Wen Jiabao tacitly admitted the programme had fallen
behind when he promised the annual meeting of the National
People's Congress in March 2012 that the government would
"tackle key problems more quickly in the exploration and
development of shale gas."
China's shale programme faces a number of above and below
China's basins are nowhere near as well explored as those in
the United States. Deposits are buried deeply below ground. And
some observers claim the gas-bearing formations may have a
higher clay content, making them harder to fracture and keep
propped open ("China Drills Into Shale Gas. Targeting Huge
Reserves Amid Challenges," National Geographic, August 2012).
The Tarim basin in the northwest is thousands of miles away
from the main centres of energy consumption and in one of the
driest region's on earth, with little water for fracking.
Sichuan has more rainfall but the region is densely
populated, much of it is heavily urbanised, and there is already
pressure on local water resources for agriculture. In contrast
to the wide open plains of North Dakota and Texas, Sichuan is
mountainous, making the local topography challenging for surface
Unlike the United States, China does not have an extensive
network of gas-gathering and transmission pipelines nor a large
eco-system of independent and innovative exploration, drilling
and development companies.
The slow pace of progress and multiple challenges facing
fracking firms have led some analysts to conclude China's shale
industry will fail to live up to expectations. But it would be a
mistake to write it off at this point. None of the challenges
looks insurmountable, and China has plenty of capital and
engineers to find solutions.
China has been drilling for and using gas in Sichuan for
more than 2,000 years. The basin is home to the country's
natural gas industry, according to China National Petroleum
Corporation ("Status and Practices of Shale Gas Exploration and
Development in Sichuan Basin" Sep 2011).
The basin already contains 113 conventional gas fields and
has more than 18,000 kilometres of gas pipelines. Production hit
15 billion cubic metres (530 billion cubic feet) in 2009.
Natural gas provides 16 percent of primary energy consumption in
Sichuan and Chongqing compared with just 4 percent for the
country as a whole.
Depth will not prevent development. The basin's most
prospective layers, the Qiongzhusi and Longmaxi formations,
actually lie on top of many of the conventional fields -- at
depths similar to the Barnett, Marcellus, Eagle Ford and
Haynesville shales in the United States.
Longmaxi and Qiongzhusi cover 56,000 and 80,000 square miles
respectively, compared with about 15,000 square miles for the
core of the Bakken and 9,000 for Argentina's Vaca Muerta. The
net organically rich layers are about 200-300 metres thick, only
a little less than Vaca Muerta's 325 metres.
Total organic content is around 3 percent compared with 4
percent in Vaca Muerta. But more of the organic matter has been
converted into oil and gas, according to estimates published by
the U.S. Energy Information Administration ("World Shale Gas
Resources: An Initial Assessment of 14 Regions Outside the
United States" Apr 2011).
Longmaxi and Qiongzhusi could each produce 340-350 trillion
cubic feet of gas, according to EIA, compared with 240 trillion
cubic feet from Vaca Muerta. The two formations combined contain
more technically recoverable shale gas than any other country
except the United States, Argentina and Russia.
Successful development of the Barnett shale directly beneath
the city of Forth Worth in Texas, shows it is possible to
extract large volumes of natural gas even in heavily urbanised
areas by using horizontal drilling and boring multiple wells
from a single drilling pad.
PetroChina drilled and fractured its first vertical shale
gas well (Wei-201) into the Longmaxi formation in April 2010,
which produced a rather limited 300,000 cubic metres over 270
days (). Faster flow rates were
achieved from the subsequent Ning-201 well.
In March 2011, PetroChina completed its first horizontal
well (Wei-201-H1) with a total depth of more than 2,800 metres
and a horizontal section of more than 1,000 metres, with 11
fracture stages ().
The company drilled another seven wells in 2011, and three
more in conjunction with Shell, including the Yang-201 well in
Fushun-Yongchuan block, which flowed up to 430,000 cubic metres
per day in testing.
Still, the drilling programmes remain very limited and have
yet to define the play's core area. In comparison, thousands of
horizontal wells have been drilled into the Barnett and Bakken
shales in the United States and the best areas for drilling are
Large-scale production of shale gas from the Sichuan basin
will not be easy. Each shale formation poses its own unique
challenges, and the problems in China are formidable. But the
problems do not appear worse than in other parts of the world,
and the prize is enormous.