China a Shale Gas Hot Spot?

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"China has potentially massive reserves of indigenous shale gas."

China becoming another shale gas hot spot

Over the last three years or so, the world has witnessed a bona fide revolution in natural gas development and production in the U.S. thanks to the shale gas revolution. And now China is pushing hard to exploit its own shale gas resources.

China, which recently became the world's largest energy consumer, has very low natural gas consumption (about 4% of the country's primary energy mix) while the worldwide average is about 23%. In a recent report, the IEA estimated China has about 26 trillion cubic meters (about 900 Tcf) of shale gas resource, similar to the magnitude of U.S shale gas resources.

That's a critical finding as China's proven conventional natural gas reserves are fairly low, about 80 Tcf in 2009. The Chinese central government wants to increase the natural gas consumption from current 4% in the total energy mix to about 8% by 2015 and to 10% by 2020.

Major challenges lurk ahead if these goals are to be met. Although China's domestic conventional gas production has been rising and recent discoveries have been very encouraging. Among them: Sinopec's discovery at the Puguang field in Sichuan in March 2006, with proven reserves of 17.7 Tcf and then in June of 2006, CNOOC and Husky made the country's first ever offshore natural gas discovery in South China Sea, with a preliminary estimated reserves of about 6 Tcf. Despite those discoveries, the gap between production and consumption has been getting bigger.

China is one of the brightest spots in world LNG supply market and has been very assertive securing natural gas supply from central Asia countries.

However, to really help secure their natural gas supply in the long run, development of the potentially massive reserves of indigenous shale gas is an obvious choice for China.

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