China’s shale gas aspirations face a reality check


Waking up to hard economic facts, China’s dreamy ambitions to replicate the US shale gas revolution have been put aside. Faced with a challenging geology and spiralling costs, the Government has scaled back production targets for 2020 to around 30 Bcm – just a third of its original goal, while simultaneously slashing subsidies. Private developers will have to take a greater risk as subsidies will be cut to 0.3 yuan per square meter from 2016 to 2018, and to 0.2 yuan from 2019 to 2020.

Unfazed by pledges from shale gas developers, China’s ministry of finance is unwilling to free up any more support, citing changes in industrial development policies and spiralling costs. Senior energy executives including PetroChina’s chairman Zhou Jiping have urged the government to extend the current 0.4 yuan per square meter subsidy to 2020 or 2030 to foster a growing use of shale gas.

To attract private funding in tapping promising shale gas plays such as in Sichuan province, the central government in Beijing now needs to open the exploration licensing wider to more private players. Though 18 companies were awarded exploration rights in two auctions in 2011 and 2012, only one of these – state-owned China Petroleum & Chemicals Corp has actually started to commercially produce shale gas. Its bigger rival, PetroChina, is also tapping its own shale gas reserves in southwest China.

Doubts over NDRC’s ambitious targets

Ambitious policy makers in China’s powerful National Development and Reform Commission (NDRC) have set a target of 30 Bcm of shale gas output by 2020.

Magazine Issue 2 Cover
The full article, along with all maps and graphs, is available in Issue 1 of Shale Gas International Magazine and can be found on page 14.
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