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China To Double Shale Gas Output

China is on track to double its shale gas production to 17 billion cubic meters over the next three years, according to Wood Mackenzie analysts.

In a note released yesterday and cited by Reuters, Wood Mac said China will add almost 700 new wells by 2020 at three large fields, two of them operated by PetroChina and one by Sinopec, all in northwestern China. The energy consultancy has estimated the combined investment in the new production capacity at US$5.5 billion.

Still, the production increase will be unable to catch up with soaring gas demand in the world’s third-largest consumer, the analysts warn. Beijing has a target of 30 billion cubic meters of shale gas for 2020, and it looks like even these investments won’t be enough to achieve it.

This in its turn means that China will need to continue raising its LNG and pipeline gas imports after they hit a record last year amid the government’s efforts to curb pollution by cutting the use of coal for power generation.

Overall gas production in the country is rising at a rapid rate, Reuters reported two months ago, but it has yet to catch up to the rate of demand growth. Last year, China produced 147.4 billion cubic meters of gas, and it will grow at an annual rate of 6-8 percent through 2020—but demand is rising faster. Related: The World’s Most Profitable Oil Major

In 2017 it jumped by 15 percent, and this year demand is expected to climb by another 12.5 percent, which is twice the projected growth rate of production. Wood Mac expects China’s LNG imports this year to soar by 25 percent to almost 49 million tons.

China has a substantial shale gas potential, but its shale deposits are not as easy to exploit as the United States’. Still, producers have managed to bring costs down enough to justify increased drilling.

By Irina Slav for Oilprice.com

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