Skip to main content

China to become shale gas producer?

LNG Industry,

Royal Dutch Shell and China National Petroleum Corp. have just signed a 30 year deal to exploit natural gas reserves in China. The deal provides for both companies to develop the 4000 km2 Jinqiu block in Sichuan province. The block will likely produce between 2 - 3 billion m3 of gas per year; Shell will be taking a larger share of the contract because it is accepting the exploration risks.

The deal is likely part of a larger alliance between the two companies, with CNPC using the expanding Chinese gas market to help it access hydrocarbon assets and Shell providing technical experience in unconventional gas. This deal to allow Shell to exploit shale gas formations might be CNPC reciprocating for Shell helping them secure access to natural gas assets in Australia, with the joint takeover of Arrow Energy.

There are an additional nine shale gas tight gas projects going on in China at the moment with BP, ConocoPhillips and New Field all getting involved. China is estimated to have 100 trillion m3 of shale gas, this is more than all the combined known shale gas reserves in the world. Natural gas is likely to play a huge part in China’s developing energy industry for developing electricity, mainly because it is seen as a clean fuel which can help China meet growing demand whilst still meeting emissions targets.

Such large reserves, if exploited, could potentially change China’s current energy policy. China has been acquiring energy assets globally, and if it continues at the same pace, the Chinese could be importing up to 40% of their natural gas needs by 2020. If they develop their shale gas reserves they could reduce this dependency on imported LNG.

This does seem possible given that China has already secured the foreign expertise to exploit the reserves in alliances such as CNPC and Shell. They also have developed gas transmission networks after more than a decade of investment. Investment is certainly not lacking either, as major Chinese oil companies are financially strong and very ambitious. Thus, China is potentially sitting on a gold mine, which could make them self-sufficient, at least in natural gas.

Read the article online at:


Embed article link: (copy the HTML code below):