China drastically reduces its ambitions to be a big shale-gas producer

[Jlaw]

Natural gas in China: Shale game | The Economist

IN 2012 China’s main planning agency, the National Development and Reform Commission, declared that the country would produce 60 billion-100 billion cubic metres of shale gas a year in 2020. It needed those forecasts to be accurate.

They weren’t. Wu Xinxiong, the director of China’s National Energy Administration, recently predicted that only 30 billion cubic metres a year will come on stream by 2020. That would barely meet 1% of China’s energy needs now, let alone in 2020.

This is profoundly disappointing. With more than 30 trillion cubic metres of recoverable shale gas, China has the largest reserves in the world, almost 70% more than in America, home of the shale-gas revolution. It is also a setback to the country’s efforts to reduce pollution. Dirty coal now makes up about 70% of energy consumption and, despite fast growth in renewable energy, gas is the only cleanish energy source that could displace enough coal to rein in carbon emissions quickly.

China has found that replicating America’s shale strategy—even with American help—is harder than it expected. Fracking works by injecting millions of gallons of water, sand and chemicals into horizontal wells at high pressure, fracturing the shale and releasing gas. American shale seams are mostly found in easily accessible areas at quite shallow depths, and formed of rock that is easy to fracture. China’s are mostly deeper, often in inhospitable areas, and made up of rock that resists American fracking techniques. Worse, some of the biggest reserves are in regions, such as Sichuan province, that have been convulsed by seismic activity or are short of water, making fracking even tougher.

China’s two biggest state oil companies, Sinopec and China National Petroleum, have been fracking furiously, but so far only Sinopec has a commercially significant shale-gas project up and running, in Sichuan’s Fuling district. It claims the field will yield 5 billion cubic metres next year, compared with just 200m cubic metres of shale gas produced nationally in 2013. Few other large shale fields are set to come online, while other natural-gas projects have missed their production targets.

Hardly surprising, then, that in May China signed a $400-billion deal with Russia’s Gazprom to import 38 billion cubic metres of natural gas a year over the next three decades. That gas, figuratively if not yet literally, really is in the pipeline.

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This is the right direction. Right now, shale gas should only be developed to advance our understanding of production and technology methods, so that it will be available should there ever be a major energy disruption. It should not used to satisfy current levels of domestic demand at all. The environmental effects are too ugly.

go nuclear and thorium

 

[FairAndUnbiased]

Source?



Huh?

The Oil Drum | Articles tagged with "fracking"

"
Natural gas prices have declined to below $3.00/mcf, levels not seen for years, yet the EIA posted the highest gas production ever in October, 2011. U.S. gas production is growing despite annual well completion rates that are half that at the peak of the drilling boom in 2008, when gas price topped $12.00/mcf. Proponents of shale gas as a “game changer” suggest that, despite the well-known high decline rates of shale gas wells, their productivity is sufficient to grow production with far fewer wells at historically low prices.
"

Historically low prices for gas and drilling costs increasing from 21% of revenue to 85% of revenue on a *known* high decline source, yet INCREASED drilling, coinciding with 0% real interest rates. There's alot of reasoned debate from energy industry insiders in the comment section, though also crazies.

 

[LeveragedBuyout]

The Oil Drum | Articles tagged with "fracking"

"
Natural gas prices have declined to below $3.00/mcf, levels not seen for years, yet the EIA posted the highest gas production ever in October, 2011. U.S. gas production is growing despite annual well completion rates that are half that at the peak of the drilling boom in 2008, when gas price topped $12.00/mcf. Proponents of shale gas as a “game changer” suggest that, despite the well-known high decline rates of shale gas wells, their productivity is sufficient to grow production with far fewer wells at historically low prices.
"

Historically low prices for gas and drilling costs increasing from 21% of revenue to 85% of revenue on a *known* high decline source, yet INCREASED drilling, coinciding with 0% real interest rates. There's alot of reasoned debate from energy industry insiders in the comment section, though also crazies.

I read the article, but I don't see the part that discusses the collapse of the industry without subsidies and cheap credit. I think many detractors of the fracking industry have focused on sentiments similar to the following, from your article:

"So, despite vocal industry proponents to the contrary, there is no such thing as a free lunch. Growing, or even maintaining, U.S. oil and gas production will require an increasing level of inputs in terms of the number of wells drilled, the footage drilled, the capital investments required, and likely, the large amounts of collateral environmental damage incurred."

My retort is: for what energy sector is this not the case? Every energy sector has seen rapidly increasing costs to extract marginal energy reserves, now that the easiest energy has already been extracted. In fact, this difficulty will start to drive prices higher, as supply starts to taper off. Higher prices will support the more difficult extraction projects, and capitalism works as everyone expects.

Not sure what you're getting at, here.

 

[FairAndUnbiased]

I read the article, but I don't see the part that discusses the collapse of the industry without subsidies and cheap credit. I think many detractors of the fracking industry have focused on sentiments similar to the following, from your article:

"So, despite vocal industry proponents to the contrary, there is no such thing as a free lunch. Growing, or even maintaining, U.S. oil and gas production will require an increasing level of inputs in terms of the number of wells drilled, the footage drilled, the capital investments required, and likely, the large amounts of collateral environmental damage incurred."

My retort is: for what energy sector is this not the case? Every energy sector has seen rapidly increasing costs to extract marginal energy reserves, now that the easiest energy has already been extracted. In fact, this difficulty will start to drive prices higher, as supply starts to taper off. Higher prices will support the more difficult extraction projects, and capitalism works as everyone expects.

Not sure what you're getting at, here.

Google

There are alot of think tanks that admit this as you see.

Also, do you not see how the prices are *falling* yet output is *increasing*?

 

[LeveragedBuyout]

Google

There are alot of think tanks that admit this as you see.

Also, do you not see how the prices are *falling* yet output is *increasing*?

The "subsidies" that the think tanks and left-wing pundits are referring to are tax credits. Tax credits are useless to an unprofitable industry, so removing tax credits will decrease profitability, not cause a profitable business to become unprofitable. That's not mathematically possible.

I don't see prices falling. I see prices gyrating around 4 USD/mmbtu for five years.