December 11, 2011

Shell Hits Jackpot with New Shale Gas In China: Reserves Could Surpass U.S.

By Economy Watch

China’s discovery of shale gas in its Eastern Sichuan province on December 6th this year could represent a drastic shift for the nation’s energy policies, said the chairman of the country's second-largest oil company, Sinopec, at the World Petroleum Congress on Wednesday.

Though China has only begun its production, "I think the total reserves are even more than the US,” said Fu Chengyu, the chairman of the state-controlled China Petroleum & Chemical Corp (Sinopec), as quoted by Reuters.
Fu added that it would take around 5 to 10 years before China could match US production levels, “but it is a matter of timing.”

The rapid development of shale gas production facilities in the US over the last three years fundamentally changed US energy markets, with the country turning from an importer to an exporter of natural gas. In the space of several years, the US went from natural gas shortages to a point where companies are now planning to export gas to Asia, with the burgeoning industry looking at new uses for the abundant gas, such as auto fuel.

Map Source: Reuters, 21 Apr. 2011 (Added by EconMatters)

According to some analysts, China discovery could not come at a better time thanks to the country’s growing need for self-serving energy resources.
"Just as China made an impact on the global oil market in the last decade, China is expected to make an impact on the global gas market over the next ten years as a steadily growing gas consumer,” said Economist Intelligence Unit industry analyst, Peter Kiernan to edieEnergy.
"China is a key focus area for development of unconventional gas, outside the US, for the world's major oil and gas companies…and development of shale gas is a high priority for the Chinese government as China's gas demand is expected to rapidly increase over the next decade and beyond,” he added.

Shell’s chief executive Peter Voser, whose company made the initial discovery, now has "great expectations" for Chinese shale gas. "We are going through the exploration phase there and are exactly analysing what potential is available now in China," he said, in an interview with The Times.

Although some industry experts have expressed doubts over the conduciveness of China’s geology for shale gas extraction, Liu Yuzhang, the vice-president of Petrochina's Research Institute of Petroleum Exploration and Development, remains optimistic of the country’s chances.

"It's good news for shale gas," said Liu, noting that while the rock formations in China were different from those in the US, Shell had already received positive news regarding the extraction from its sites.

"Shell has two vertical wells and they got very good primary production,” added Liu.

Courtesy EW News Desk Team at Economy Watch(EconMatters author archive here)

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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