China taps shale gas through combined efforts

(Xinhua) Updated: 2012-10-06 14:26

But experts said that imported foreign exploitation technology may not be well-suited to China's geological conditions, and Chinese companies have to work out their own way instead of relying heavily on foreign know-how.

Experts also worried that shale gas exploitation would face the same plight as natural gases.

"As shale gas production scales up, problems such as insufficient infrastructure will become bottlenecks for exploitation," said Zhang Dawei, an analyst with the Strategic Research Center of Oil and Gas Resources under the MLR.

In the US, the extensive pipeline network for natural gases has greatly reduced the cost of exploiting shale gas, whereas China's current pricing mechanism for natural gases has kept investors away, experts said.

The authority should grant more third-party access into network facilities to encourage a more open, efficient marketplace, experts suggested.

To address the issue, Chinese energy authorities and executives met with their US counterparts on a forum in San Antonio, Texas, in mid-September to discuss the role the government could play in regulating shale gas exploitation and managing subsequent safety and environmental problems.

Eyeing the future

The nation is now mulling favorable policies, including introducing subsidies and tax breaks for the sector to support its development, an official with the MLR said in late September.

Prior to any specific incentive being rolled out, local governments and individual enterprises have long been preparing to broaden their shares of the fledgling business.

"Both local authorities and companies are reaching out for the future. The returns might be small at the present, but they have formed their goals of development," an energy analyst told Xinhua's Outlook Weekly.

One of the latest moves took place in August in Southwest China's Chongqing municipality, in which the municipal government set itself a shale gas annual output target of 1.3-1.5 billion cubic meters by 2015.

The recoverable reserves of the region are now estimated at 2.05 trillion cubic meters.

Earlier in June, Jiangxi province founded the country's first research institute specializing in shale gas exploitation. The eastern province is also one of the national pioneers in the geological survey and assessment of shale gas reserves.

Domestic companies, including the five State-run energy giants and provincial-level energy firms are also eyeing the future of the shale gas boom, strengthening their cooperation ties with local governments.

Coal-fired thermal power, which accounts for about 70 percent of China's power capacity, has made power companies very susceptible to coal price fluctuations.

The development of the new, alternative energy source could help taper down the coal price hikes, and power companies would have more say in negotiations with their coal suppliers, industry insiders said.

Earlier media reports said China aims to pump 6.5 billion cubic meters of shale gas by 2015, and the commercialization of shale gas production can be expected in the 13th Five-Year Plan period (2016-20).