According to Shale Gas Development Plan (2011-2015) issued by China's National Energy Administration, from 2016 to 2020, China will increase investment in shale gas development by expanding the production volume of 19 existing reserves while accelerating exploration of new reserves. By 2020, the country's annual production of shale gas is expected to reach 60 to 100 billion cubic meters. "To reach this goal, we will need some technical breakthroughs by 2015," notes Zhang Yuqing, director of the Oil and Natural Gas Department of China's National Energy Administration. "I think that if our shale gas production reaches 100 billion cubic meters by 2020, it will play a key role in increasing our energy self-sufficiency and improving our energy structure."

Challenges

China likely has even more shale gas resources than the U.S., but the extraction process is even more difficult in the Eastern nation. Per capita land and water resources in China are far lower than the U.S., which makes the ecology more fragile. On average, a shale gas well needs 200,000 tons of water, but China's shale gas reserves are found primarily in inland and basin areas which usually lack water. Consequently, some experts warn that intensive development of shale gas in Liaoning, Shaanxi and Sichuan provinces would lead to a "water fight" between industry and agriculture. Additionally, water injected into the wells needs to be mixed with heavy chemicals, which can cause pollution of local ground water.

Actually, shale gas shares the same composition as regular natural gas, but is harder to extract because it's trapped within deep rock beds. To illustrate the difference another way, extracting conventional natural gas is like collecting blood from veins while shale gas is like blood from capillaries. China has yet to master techniques for extracting shale gas and needs time to introduce advanced techniques used in the U.S. Furthermore, those techniques are based on America's unique regions with specific geographical features, so even if certain techniques are introduced, it remains uncertain whether they can be adapted to China's special geographical characteristics and environment.

Additionally, the American "shale gas revolution" occurred within a market model involving about 6,300 natural gas companies, while in China, only a handful of large state-owned energy enterprises dominate the market. "It is easy for small companies to innovate and achieve breakthroughs in the development of shale gas because they can make quick decisions, which is much harder for big companies with bureaucratic structure," remarks John Mork, CEO of Energy Corporation of America (ECA).

After two centuries of development of its energy industry, the United States features web-like oil and gas pipe networks totaling about 500,000 kilometers. Despite China's fast development in recent years, its pipelines stretch only 60,000 kilometers, a situation which hinders the quick commercialization of shale gas resources as well as enthusiasm of producers.

"If China cannot find a more economic, water-saving and environmentally-friendly method to develop shale gas than the U.S., it's too early to talk about a 'shale gas revolution,'" adds Zha Quanheng, former deputy director of Exploration Department of Ministry of Petroleum Industry.