Shale Gas Development Skyrocketed By 2020 or to Achieve 30 Billion Cubic Meters

National Energy Administration has recently issued a Shale Gas Development Plan (2016-2020), stating that with proper policy support and smooth market development, the country would substantially increase shale gas production to 30 billion cubic meters by 2020. Experts say that shale gas development will effectively promote the transportation, steel, materials, equipment, cement, chemical and other related industries, attract domestic and foreign investment, and promote sustainable development of local and national economy.

During the 12th Five-Year Plan period, China's shale gas exploration and development has achieved a major breakthrough, making China the first country outside North America to achieve large-scale commercial development, laying a solid foundation for the Thirteen Five-year Industrial Development. A source from National Energy Administration says that during the 13th Five-Year Plan period, the economic new normal will continue optimizing the energy structure, increasing the demand of natural gas and other clean energy, providing strategic opportunity for large-scale development of shale gas.

With the strengthening of air pollution control in China, clean and low-carbon development strategies and new urbanization will be promoted so that natural gas will play a greater role in adjusting and optimizing energy structure.

Energy Development Strategic Action Plan (2014-2020) issued by State Council Office clearly points out that by 2020 natural gas will account for more than 10% of China's primary energy consumption and vigorously developing shale gas is in line with China's energy development trend.

Rich resources and a good industrial foundation have provided a solid guarantee for the development of China's shale gas industry. During the 12th Five-Year Plan period, shale gas development in South China has made breakthroughs. Sichuan Basin has achieved its commercial development, and many other favorable areas have obtained industrial test airflow. The shale gas resources of Longmaixi Formation in the South China Sea and their development potential have been strongly confirmed. At the same time, China has basically mastered the 3500m neritic facies development technology, which will be a strong technical support for the Thirteen Five Year Plan period.

China's single well shale gas investment is high, with quick production decline; hence we need a large number of wells for stable output. Therefore, the shale gas development and investment are of large-scale, with long payback period and much uncertainty, which means greater financial pressure and investment risk for shale gas developers.

In the technical level, deep oil field development technology is not yet mature. The development of shale gas resources in a depth of more than 3,500 meters requires a higher level of horizontal well and capacity enhancement technologies and equipment. Inadequate competition for exploration and development is another major problem. Mineral rights in shale gas area overlap with registered oil and gas mineral rights. Besides, the exit mechanism is not ideal for conventional oil and gas right; hence it is difficult to play the special advantage of shale gas.

With the falling prices of oil, coal and other conventional energy, natural gas competitiveness and consumption growth slows down significantly. At the same time, the domestic natural gas output has increased steadily. Long-term LNG import agreements have been signed between China and Russia, Central Asia, and Myanmar. The natural gas supply capacity will increase in the future. Experts said that according to the current energy consumption structure, in the 13th Five-Year Plan period, there would be adequate supply of natural gas.

In the long run, the development of shale gas is of great significance to promote China's scientific and technological progress, economic development, energy security and energy structure optimization. To this end, the Plan clarifies four key tasks for the future development of shale gas:

First, promote scientific and technological research. We must follow closely shale gas technology revolution, make breakthroughs in reservoir evaluation, horizontal well completion, capacity enhancement, gas reservoir engineering, exploration and development technology, and accelerate the upgrading of existing technologies.

Second, explore and develop shale gas in a gradual manner. We will press ahead with shale gas development with prioritized development, evaluation breakthrough and potential studies.

Third, strengthen the construction of national shale gas demonstration area. During the "Thirteenth Five-Year Plan" period, we will construct four state-level shale gas demonstration areas in Changning-Weiyuan, Fuling, Zhaotong and Ya’nan. Through these demonstrations, we will improve and promote effective technologies, management models and mechanisms.

Finally, improve infrastructure and market. According to the construction on shale gas production capacity and the national natural gas pipeline construction and planning, we will support the shale gas to connect to the pipeline network or be used in proximity. Encourage all kinds of investors to enter the shale gas sales market, and gradually form a market with diversified players such as shale gas mining enterprises, selling enterprises and urban gas operators, etc.

Source: Economic Daily