China’s Elusive Shale Gas Boom

The Chinese government is clearly backing the increased use of natural gas in China’s energy mix as it transitions toward cleaner fuels. A centerpiece of China’s natural gas strategy is to develop its ample shale gas reserves, a topic of much discussion both inside and outside China. With the largest technically recoverable shale reserves in the world, China desires to replicate the US shale gas boom. This desire is reflected in Beijing’s plan, unveiled in March 2012, for the country to achieve a highly ambitious shale gas production target of 60-100 billion cubic meters (bcm) by 2020.

As a result, Beijing has adopted a number of policies to promote and support shale gas development. By late 2014, however, the State Council had already cut China’s 2020 shale gas production goal to just “over 30 bcm.” The dramatic reduction of the official target reflects an acknowledgement that China faces great obstacles in exploiting its shale gas resources, particularly complex geology and the cost of extraction, according to the author.

What’s more, the author highlights the fact that there continues to be a debate in China over whether it even makes sense to prioritize shale gas development over other conventional and unconventional gas production such as tight gas and coal-bed methane. For instance, China’s national oil companies (NOCs) already have mature technologies for getting these types of unconventional gas out of the ground.

While acknowledging the debate, this paper focuses specifically on China’s shale gas development and the prospects ahead, with the assumption that China intends to proceed toward its stated targets, including opening up the sector to more private competition. The author argues that ultimately, however, China’s best hope for ramping up domestic shale gas production may lie with the NOCs.

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