China’s plans to produce 6.5bn cubic metres of shale gas by 2015 has been called into doubt by a new report.
Analysts at GlobalData believe China’s ambitions to match the shale boom seen in the US are “overly optimistic”.
They say that the geology of China’s shale gas reserves, water shortages, insufficient pipeline infrastructure and government control over natural gas prices will all present obstacles to Beijing’s targets.
The Chinese Ministry of Land and Resources stated in March that the country has onshore shale gas reserves of 134.4 trillion cubic meters and exploitable shale gas reserves of 25.1 trillion cubic meters.
The government has promised to support the research and development of shale gas technology, accelerate the process permitting investors to develop shale gas reserves and consider the introduction of subsidies for shale gas projects.
But the GlobalData report states that Chinese shale gas companies currently cannot use the high performing drilling technologies used in the US, as more research is needed to adapt the American methods to China’s very different geology.
It also points out that hydraulic fracturing technology requires vast quantities of water but water shortages are a major issue in China.
And it claims that state control over natural gas prices will keep natural gas prices artificially low, not reflecting the realities of the natural gas market. This, says the report, will leave shale gas firms with little incentive for development, as “profitability will be minimal”.
“With the development of shale gas requiring huge capital investment, the industry remains uninspired as government policies, especially on pricing, threaten to remove any financial attraction from the industry,” the report concludes.