• 4 minutes Tariffs to derail $83.7 Billion Chinese Investment in West Virginia
  • 9 minutes Battle for Oil Port: East Libya Forces In Full Control At Ras Lanuf
  • 17 minutes Kaplan Says Rising Oil Prices Won't Hurt US Economy
  • 44 mins Battle for Oil Port: East Libya Forces In Full Control At Ras Lanuf
  • 53 mins Saudi Arabia plans to physically cut off Qatar by moat, nuclear waste and military base
  • 16 hours Corruption On The Top: Netanyahu's Wife Charged With Misuse of Public Funds for Meals
  • 2 hours Why is permian oil "locked in" when refineries abound?
  • 5 hours Saudi Arabia turns to solar
  • 9 hours Russia's Energy Minister says Oil Prices Balanced at $75, so Wants to Increase OPEC + Russia Oil by 1.5 mbpd
  • 5 hours Teapots Cut U.S. Oil Shipments
  • 22 hours Gazprom Exports to EU Hit Record
  • 4 hours Oil prices going down
  • 5 hours Hot line, Macron: Phone Calls With Trump Are Like Sausages Best Not To Know What Is Inside
  • 18 hours U.S. Withdraws From U.N. Human Rights Council
  • 6 hours Putin Says 'Fierce' U.S. Politics Hindering Summit With Trump
  • 22 hours OPEC Meeting Could End Without Decision - Irony Note Added from OPEC Children's Book
  • 21 hours Could oil demand collapse rapidly? Yup, sure could.
  • 21 hours Sell out now or hold on?
  • 20 hours What If Canada Had Wind and Not Oilsands?
Alt Text

Oil-Rich Venezuela Is Out Of Gasoline

Iván Freites, a secretary of…

Alt Text

Gas Wars: The First Energy Conflict In 2018

Territorial disputes over newly discovered…

Alt Text

Thanksgiving Travelers Smash Records

The U.S. is preparing to…

Charles Kennedy

Charles Kennedy

Charles is a writer for Oilprice.com

More Info

Trending Discussions

LNG Investments At Serious Risk If China Succeeds On Shale

China shale gas

The global natural gas glut could get much worse if China has its way.

The spot prices for liquefied natural gas (LNG) have plunged in recent years, falling by more than 75 percent from the 2014 highs. Too much supply has run headlong into a market that has seen demand slow significantly.

But China could make things much worse. In an effort to find a domestic source of energy, and clean up its horrific air pollution problems by shutting down coal plants, the top state-owned energy companies are scrambling to develop shale gas.

China has been trying to develop shale gas for several years, but has struggled because the geology is complex, there is a dearth of infrastructure in places where the gas is located, and water availability issues have also made development difficult. China is persevering, however – Sinopec has announced a goal of doubling production within five years, The Wall Street Journal reports. That would take production from roughly 2 to 4 billion cubic feet per day by 2020.

The logic for state-owned companies like Sinopec is obvious. Oil production from its aging fields is falling, so they are venturing into new markets. “By growing gas production they are effectively trying to mitigate what’s happening on the oil side of the business,” Neil Beveridge, an analyst at Bernstein Research, told the WSJ. Ramping up shale gas “looks like more of a volume strategy than a value strategy,” he added. Related: What’s Next For Oil - Could This Be The Start Of A Correction?

In Sinopec is successful, the implications would reverberate beyond China’s boarders. If China ramps up shale gas production, it might not need nearly as much imported LNG as everyone expected. That would put billion-dollar investments at risk, such as ExxonMobil’s recent $2.5 billion offering for InterOil, a company that has gas assets in Papua New Guinea and will allow the oil major to expand LNG exports from that country. Or, Royal Dutch Shell’s $54 billion purchase of BG Group could turn out to be a major loser if LNG markets remain depressed for years to come, something that would be more likely if China succeeds in developing a successful shale gas industry.

For now, substantial hurdles remain. Sinopec is still learning shale drilling techniques and infrastructure needs improvement. Sinopec boosted output by 10 percent in the first half of 2016 compared to the same period a year earlier, but it is not on track to hit its 18 percent growth target for the year, according to the WSJ.

By Charles Kennedy of Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage

Trending Discussions


Leave a comment
  • Godfree Roberts on August 01 2016 said:
    China's "horrific air pollution problems"?
    Don't get carried away by media nonsense. Even the most polluted city in China never made it into the world's top ten. And air pollution in all Chinese cities is declining at the target rate of 5% annually.
    London's NOx is worse than Beijings, incidentally.
  • Rudolf Huber on August 02 2016 said:
    LNG buyers have long memories and they won't forget how badly they were treated by sellers for almost a decade when LNG was expensive and hard to get. And China is not known for its short memories. Besides, shale is also thought as a job maker which would help to alleviate the jobless problem in the Chinese hinterland. But this is not news to those that looked beyond the bubble - this article is from the end of 2012. http://www.lng.guru/the-china-lng-story-more-toxic-than-the-us-story-was/

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News