Natural gas supply expected to surge

PUBLISHED : Monday, 23 April, 2012, 12:00am
UPDATED : Monday, 23 April, 2012, 12:00am


The contribution of unconventional natural gas to the mainland's supply is expected to surge to 30 per cent of total supply by the end of this decade from 1.5 per cent currently, according to an industry expert.

The prediction by Shi Xin, deputy director of the strategic development office of China Petrochemical's economics and development research institute, underlines China's ambition to tap into its huge reserve of hard-to-extract gas trapped underground to reduce the need to import.

She was speaking at the Asia Gas Congress. China Petrochemical, the nation's second largest oil and gas producer, is the parent of listed China Petroleum & Chemical (Sinopec).

The mainland is 80 per cent self-reliant on energy, thanks to its huge reserve of coal, although the dirty-burning fuel has created huge pollution problems.

Cleaner-burning natural gas is a key alternative, but China has only 1 per cent of the world's proven reserve of conventional natural gas that is easily extracted using traditional methods.

Mainland gas producers are increasing production of unconventional, or hard-to-extract, gases in the form of tight gas, coal-bed methane and shale gas.

These gases tightly adhere to rock or coal formations. Production requires advanced technology such as horizontal drilling and the high-pressure injection of chemicals and water to create fractures in underground formations to release the gases.

Large-scale commercial success from using such technology was first achieved in the United States, and is being increasingly deployed in other countries.

The US already sources half its gas output from such unconventional sources, compared to the world average of 13 per cent, Shi said.

China is keen to learn from US producers and mainland state oil and gas firms have invested in projects in North America.

The National Administration of Energy has targeted for shale gas output to reach 6.5 billion cubic metres (bcm) in 2015, rising to between 60 bcm and 100 bcm in 2020. Production is currently undergoing small-scale trials. Beijing also aims to raise natural gas extracted from coal mines and coal seams to 30 bcm in 2015 from 1 bcm in 2010.

The speed of a ramp-up in unconventional gas production will determine the amount of gas imports.

As China's annual gas consumption growth accelerated from an average of 16 per cent in the decade to 2010 to 20 per cent last year - and output growth lagging at 14 per cent in the past 11 years - imports surged.

Last year's imports, via tankers in chilled and liquefied form or long-distance pipelines, jumped 90.3 per cent to 31.6 bcm.

This amounted to 24 per cent of consumption of 130.7 bcm, up from 11 per cent three years ago and 6 per cent five years ago, due to a huge piped gas import deal with Turkmenistan, as well as liquefied natural gas (LNG) imports from Australia, Indonesia, Malaysia and Qatar.

If the consumption and production projections given by the National Energy Administration for 2015 and 2020 are realised, the gas import dependency ratio will rise to 29 per cent in 2015 before easing back to 24 per cent in 2020.

The administration forecast mainland gas demand to grow at an average annual rate of 11.2 per cent to 340 bcm between last year and 2020, and domestic output to rise at an average 10.9 per cent to 260 bcm in the same period.

'China will account for roughly 30 per cent of the world's newly added gas demand in the rest of the decade,' Shi said.