China will not replicate the rapid growth seen in the US in the development of unconventional gas projects due to the unique challenges the country faces, Wood Mackenzie's Gavin Thompson said at an industry conference in Taiwan Thursday.
"The industry cannot compare China's unconventional gas development with that of the US due to China's unique set of challenges," Gavin Thompson, director of China gas research at WoodMac, said.
State-owned PetroChina, whose role is crucial in maintaining the fine demand-supply balance in China, will seek an additional 5 Bcf/day of piped gas from Central Asia and Russia via contracts to be signed in the next three-four years to ensure supply by 2017-18, Thompson said.
As the prices for the imports will be tied to oil, the more expensive imported gas means higher city gas prices for PetroChina to breakeven. But the amount of investment needed to develop unconventional gas and build infrastructure will make it less compelling to bring on the supply any sooner and limit the pace of coalbed methane and shale gas growth in the current decade.
China has to address unique geological conditions, while land access and water usage are also critical issues that need to be resolved.
Chinese landowners lack the incentives seen in the US to cooperate with upstream operators as mineral rights are state-controlled and they would not directly benefit from production, Thompson said.
Limited third-party access to transmission pipeline infrastructure continues to pose a major obstacle to independent developers.
The process of getting approval for project plans has been "notoriously slow" as the National Development and Reform Commission places great emphasis on understanding new technologies, developing regulatory frameworks and weighing the impact on the local population, he added.
"With unconventional gas still facing geological, technical and commercial challenges, imports are required to meet demand towards 2020 and it is precisely because of this requirement and the need for higher prices to support this that unconventional gas growth will be a longer-term development," Thompson said.
Instead, PetroChina is focusing on onshore conventional and tight gas production for near-term volumes.
The company's Changqing Oilfield Company has stated that it has 75 Tcf of recoverable reserves and this is attracting additional investment, Thompson said.
It is estimated that China holds a potential 26 trillion cubic meters of shale gas, although the reserves are based on field studies and have not been proven to date.
The government plans to soon launch its maiden bid for shale gas licensing and four local oil companies will be permitted to participate in the bid for six blocks.
"The industry cannot compare China's unconventional gas development with that of the US due to China's unique set of challenges," Gavin Thompson, director of China gas research at WoodMac, said.
State-owned PetroChina, whose role is crucial in maintaining the fine demand-supply balance in China, will seek an additional 5 Bcf/day of piped gas from Central Asia and Russia via contracts to be signed in the next three-four years to ensure supply by 2017-18, Thompson said.
As the prices for the imports will be tied to oil, the more expensive imported gas means higher city gas prices for PetroChina to breakeven. But the amount of investment needed to develop unconventional gas and build infrastructure will make it less compelling to bring on the supply any sooner and limit the pace of coalbed methane and shale gas growth in the current decade.
China has to address unique geological conditions, while land access and water usage are also critical issues that need to be resolved.
Chinese landowners lack the incentives seen in the US to cooperate with upstream operators as mineral rights are state-controlled and they would not directly benefit from production, Thompson said.
Limited third-party access to transmission pipeline infrastructure continues to pose a major obstacle to independent developers.
The process of getting approval for project plans has been "notoriously slow" as the National Development and Reform Commission places great emphasis on understanding new technologies, developing regulatory frameworks and weighing the impact on the local population, he added.
"With unconventional gas still facing geological, technical and commercial challenges, imports are required to meet demand towards 2020 and it is precisely because of this requirement and the need for higher prices to support this that unconventional gas growth will be a longer-term development," Thompson said.
Instead, PetroChina is focusing on onshore conventional and tight gas production for near-term volumes.
The company's Changqing Oilfield Company has stated that it has 75 Tcf of recoverable reserves and this is attracting additional investment, Thompson said.
It is estimated that China holds a potential 26 trillion cubic meters of shale gas, although the reserves are based on field studies and have not been proven to date.
The government plans to soon launch its maiden bid for shale gas licensing and four local oil companies will be permitted to participate in the bid for six blocks.
