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China To Boost Shale Output To Cut Import Dependence

China is looking to increase its natural gas production, especially shale gas output, to reduce its import dependence while demand continues to grow in the foreseeable future, a government research report says, as carried by Reuters.

Increasing conventional and unconventional natural gas production would be crucial for China to meet soaring demand while trying to cut the share of gas imports at the same time, according to the report prepared by the oil and gas department at the National Energy Administration (NEA) and a research arm of the State Council of China.

Government estimates show that Chinese natural gas consumption is set to grow by 10 percent this year, reaching 310 billion cubic meters (bcm). This year’s growth would be lower compared to last year’s 17.5-percent consumption increase, yet Chinese demand is expected to continue to grow until 2050, according to the report cited by Reuters.

The trade war with the U.S. has likely slowed China’s natural gas demand this year, the report says. Due to the trade war, China also has a tariff on imports of U.S. liquefied natural gas (LNG), and due to the tariff and the trade spat, Beijing is not buying as much LNG from the U.S. as it used to.

Still, China is expected to continue to import growing volumes of LNG and could become the world’s top LNG buyer as early as in 2022, outpacing the current leader, Japan, Wood Mackenzie said in a recent report.

Related: OPEC Abandons ‘’Whatever It Takes Strategy’’, Boosts Production

But in order to reduce import dependence, China is betting on boosting domestic production, especially in the southwest in the Sichuan province, in the northern Erdos basin, and offshore.

China is set to double its natural gas production by 2040, but challenges in developing shale gas resources have led to a lower production outlook and expectations of more imports in the long term, Wood Mackenzie said last week.

China’s domestic natural gas supply is forecast to double to 325 bcm in 2040 from 149 bcm in 2018, according to Xueke Wang, a consultant at Wood Mackenzie. Yet, this latest forecast for 2040 is 39 bcm lower than WoodMac’s previous outlook, mostly dragged down by lowered forecasts for shale gas and coal bed methane (CBM) production, Wood Mackenzie said in its recent research.

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By Tsvetana Paraskova for Oilprice.com

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