China Reveals 25tn cu metres of Shale Gas

China announced the results of its most extensive official appraisal of shale gas reserves on Thursday, having found potentially recoverable resources of 25.1tn cubic metres – less than previous estimates.
 
Although the figure is lower than an earlier estimate of 31tn cubic metres, China is still believed to have some of the largest reserves of shale gas in the world and has been working to develop shale gas as a cornerstone of its energy policy. The new estimate is enough gas to meet the country's current consumption for nearly 200 years if fully extracted.

The Ministry of Land and Resources said China's complicated geology and lack of technological expertise would make extraction difficult but reaffirmed that shale gas would be central to the country's energy policy.

Global oil companies, including Shell, Chevron and BP, have been active in working with Chinese majors such as CNPC, Cnooc and Sinopec to develop local shale gas reserves, although none of these projects has yet produced shale commercially.

China is the world's biggest consumer of energy and significant domestic shale gas discoveries could enable it to reduce its imports of oil and gas.

Beijing has tried to promote shale gas and other "unconventional" gas forms such as coal bed methane through supportive policies, including price subsidies. The quest for expertise in unconventional gas extraction has also driven Chinese oil majors overseas and Cnooc and Sinopec spent billions of dollars last year investing in unconventional gas assets abroad.

"Tapping into shale gas resources is very significant for optimising China's energy structure, improving supplies of sustainable energy and boosting economic and social development," said Yu Haifeng, deputy head of geologic exploration at the ministry of land and resources, at a press conference on Thursday.
 
"China's natural gas consumption continues to grow fast and supply is tight. If China's shale gas annual output is able to surpass 100bn cubic metres by 2020, China's entire oil and gas resources structure would be changed and [shale gas] would become an important pillar," Mr Yu added.

Analysts cautioned that any estimate of the country's shale gas resources was based on very little drilling and that China's shale gas geology was not yet well understood.
 
"You can have a huge number [of reserves] that is potentially recoverable but that doesn't mean that it is going to be produced," said Gavin Thompson, director of China gas research for Wood Mackenzie, the energy consultancy. "It could be very expensive to produce or it could be a different kind of shale... There are many more variables that need to be understood."
 
Building up a sufficient pipeline infrastructure, reforming the gas pricing system and developing a clear regulatory framework were some of the uncertainties that would affect how China's shale gas resources were developed, Mr Thompson said.

The new reserves estimate was based on year-long research by the ministry of land and resources