Challenging geology, insufficient infrastructure, and low well productivity are set to result in China badly missing its own shale gas production target to 2020, analysts say.
China has set a target to produce 30 billion cubic meters (bcm) of shale gas per year by 2020.
Yet, according to analysts at S&P Global Platts Analytics and Wood Mackenzie, China will barely meet half of that target by next year, despite the increased efforts to tap more shale gas resources to add to the domestic gas supply amid soaring demand as many households are switching from coal-fired to gas-fired heating.
“We think the 30 billion cu m by 2020 target is unreachable unless there is a major breakthrough in technology and infrastructure,” Jeffrey Moore, Asia LNG manager with S&P Global Platts Analytics, told S&P Global Platts.
According to Moore, China will reach 13 billion bcm of shale gas production a year by 2020.
China is estimated to have huge shale gas reserves, but it is very unlikely that it will be able to repeat the U.S. shale gas boom. China’s shale gas deposits are in remote, geologically challenging areas. “Geologically challenging” means that they are in mountainous regions and the gas-bearing rocks are much deeper than they are in the U.S. shale patch. Also, the remoteness of these deposits means there is no established infrastructure for production and transportation of all these trillions of cubic feet of gas.
Earlier this month, BP was said to become the latest international major to quit drilling for shale gas in China because of poor exploration drilling results so far. Related: Saudis Look To Boost Gas Production In A Big Way
Commenting on BP’s intention to exit China’s shale gas, Xianhui Zhang, Wood Mackenzie Eastern Asia upstream research analyst, said earlier this month:
“We understand that both poor well performance and challenging above-ground conditions contributed to BP's decision. The difficulties, for both national oil companies (NOCs) and oil Majors, highlight the unique challenges of developing shale gas in China. These include complex and deep reservoir geology, low well productivity, marginal economics and infrastructure constraints.”
According to WoodMac, China will produce 15 bcm/year of shale gas by 2020—significantly lower than the government’s target of 30 bcm.
“While we still expect double-digit growth in shale gas output this year, development challenges remain. Shale gas is an important part of China’s gas supply story in the long-run, but for now it is a minor contributor,” Zhang said.
By Tsvetana Paraskova for Oilprice.com
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