China and fracking

China's annual output of shale gas is expected to grow from near zero in 2012 to 6.5 billion cubic meters in 2015 and at least 10 times that by 2020, the government said in its 2012 development plan. The move is seen as reducing reliance on dirtier coal and so cutting carbon emissions, but could encounter the same problems around tremors and water pollution as the fracking boom in the U.S. The plan urges Chinese companies to work with foreign companies to exploit unconventional resources. The Wall Street Journal said the plan "could open opportunities for foreign companies, which are eager to tap the market."

About 60 shale exploration wells in China have been drilled from 2011 to mid-2013, according to the consulting firm IHS CERA. Some have reported that China sits on a "fracking gold mine", noting that China's shale gas reserves are 50% larger than our own.

Estimated resources
According to the U.S. EIA (whose estimates are often based on industry estimates), Chinese shale may hold 1,275 trillion cubic feet of gas, or 12 times the country’s conventional natural-gas deposits; China’s “technically recoverable” reserves are almost 50 percent more than the 862 trillion cubic feet held by the U.S., according to the EIA.

In the wake of the EIA report, China commissioned its own studies into the extent of their shale resources. In March 2012, the Chinese Ministry of Land and Resources estimated the technically recoverable resources of shale gas in China at 886 tcf, about 30% below the EIA estimate.

Production and consumption
China's gas production more than tripled over the last decade. In 2011, China produced 3.6 Tcf of natural gas, up around 9 percent from 2010, while the country consumed 4.6 Tcf.

LNG Terminals
Click here for a 2012 list of LNG terminals planned or operating in China, according to data released by the government, China’s three state oil companies, and reports by media.

Companies
In January 2012, China Petrochemical Corp. - the second-largest Chinese oil company - agreed to buy a one-third stake in five Devon Energy exploratory oil projects in the U.S. for $900 million, to expand shale reserves. The company, known as Sinopec Group, will pay $900 million in cash and as much as $1.6 billion in Devon’s future drilling costs, funding 125 wells in the coming year. China National Petroleum Corp., Sinopec Group, and Cnooc Ltd. are reportedly seeking to gain technology through partnerships in order to develop China’s shale reserves, estimated to be larger than those in the U.S.

According to Bloomberg, U.S. gas explorers including Chesapeake Energy and Devon Energy are selling interests in shale fields to international energy companies such as Total and Sinopec to finance drilling on leases acquired during a “massive land grab” in 2007 and 2008 as oil and gas prices soared to record highs, a bubble that has since deflated, leaving operators like Chesapeake without the funds to fulfill clauses that set deadlines for drilling by a certain period or forfeiting the leases.

Coalbed methane
Gas output from China's coal seams (coalbed methane) is set to hit 8 billion cubic metres (bcm) in 2012, according to Reuters, up from 4 bcm in 2011. The extraction process is different from fracking: gas companies construct long and winding lateral wells that allow water to drain away and gas to flow out, a process developed after two decades of experimentation. Producers are pumping from a myriad of coal seams in Shanxi estimated to hold as much as 10 trillion cubic metres (tcm) of gas -- nearly four times China's proven gas reserves of 2.8 tcm. China is investing 100 billion yuan ($16 billion) to increase output to 16 bcm by 2015.

Underground coal gasification
On April 16, 2012, it was reported that Linc Energy of Australia is setting up a joint venture with Golden Concord in China for underground coal gasification—the production of energy by burning coal where it lies, deep below the Earth’s surface. Golden Concord will inject US$15 million of working capital into the joint venture, which aims to start building a UCG operation in China within six months of binding legal agreements being signed. Gas produced through the process will be converted to liquid fuels.

Companies

 * Sinopec
 * China National Offshore Oil Co.

Related SourceWatch articles

 * China and coal