CBM is expected to become the second largest domestic unconventional gas supply after shale gas, and account for 14% of total domestic gas supply by 2030, Leslie Lie, upstream analyst for Wood Mackenzie, said.
China will, however, not meet the current 11th Five-Year Plan CBM target of 5 billion cubic meters/year (176.58 Bcf/year or around 484,000 Mcf/d) by 2010 as this year's production of 120,000 Mcf/d will be less than 25% of the target, Lie said.
The major basins of Qinshui, Ordos and Junggar are believed to hold CBM resources of 664 Tcf, of which Wood Mackenzie estimates about 260 Tcf or 40% can be recovered.
The largest uncertainty lies in the timing of its development and the investment needed to bring CBM to market, Wood Mackenzie said. The cost of this supply, albeit higher than domestic conventional gas projects, would be lower than contracted oil-indexed gas imports, it added.
Wood Mackenzie outlined three key challenges that impede near-term growth in China's CBM development. Firstly, a lack of pipeline access for CBM operators; PetroChina and Sinopec dominate onshore gas production and hold monopoly positions in transmission pipeline infrastructure, rarely yielding to third party access. Secondly, a need for large scale investments to accelerate
CBM exploration and prove up reserves. Lastly, a need for basin-specific technology to address unique geological conditions in China implies the need for more advanced development techniques.
The Chinese government is determined to stimulate domestic exploration and development to reduce reliance on oil-indexed imports, Wood Mackenzie said.
Gas price reform will be a catalyst for change, as the government makes adjustments to reflect the reality of the country's gas supply mix, it said. With reforms in place, the economics of the CBM projects could attract major new investments and reduce the need for higher cost imports, it said.
Lie added that foreign companies with skills honed in North American unconventional gas exploration and production will want to consider exporting their expertise to China based on their potential as a major player in the global unconventional gas business.
"China will require partnerships and technology in the initial phase of development, creating a window of opportunity for qualified foreign players. Their involvement is now publicly recognized by PetroChina and other companies as critical," Lie said.
China Chemical Weekly: http://news.chemnet.com/en/detail-1403616.html
