China shale gas ambition faces reality check
Commercialisation of the mainland's rich shale gas resources is proving difficult for policymakers keen to shift away from coal
The mainland is believed to have the world's largest shale gas resource, but extracting the cleaner-burning fossil fuel is proving tougher than expected and highlights the hurdles policymakers face in plotting a shift away from coal-fired power.
Shale gas exploration is focused on the resource-rich but remote northwest, where a water shortage has been cited as a barrier to commercialisation, and in the country's southwest. This region, mainly in Sichuan province, is said to have "challenging geology" and a high population density compounds the difficulties.
A lack of access by independent players to quality resource exploration acreages, which tend to overlap with existing conventional gas resources controlled by the nation's two state-backed onshore oil and gas giants, also presents barriers to faster industry development.
"If China does not tackle the overlapping resource issue by opening up access to the [non state-owned] shale resource players, then China's pace of shale gas development will depend almost entirely on the investment behaviour of [PetroChina] and Sinopec," energy consulting firm The Lantau Group said in a report last month.
It said exploration rights granted in two rounds of tenders by Beijing in the past four years, while free of overlaps with the acreages under the control of the two state majors, are mostly in mountainous areas in southwest China that were "at best, second or third-tiered resources".
Simon Henry, chief financial officer of European oil and gas giant Royal Dutch Shell, told investors in New York on September 5 that it would trim its investment in its joint shale gas exploration project with PetroChina in Sichuan, Bloomberg reported.
