An untapped resource

Shale gas is an increasingly important piece of the energy puzzle around in the world, thanks to hydraulic fracturing, which has changed the energy landscape dramatically, particularly in the United States. According to the US Energy Information Agency, China holds an estimated 1,115 tcf of technically recoverable reserves of shale gas, which is more than the United States, and may be the largest in the world. As a net importer of oil since 1993 and a net importer of natural gas since 2007, and with GDP projected to increase by 7.5% in 2013, China needs to secure sufficient energy to sustain its economic growth, for which many see shale gas as a solution.

Current development

China conducted its first shale gas study in 2004, and five years later, a number of blocks were selected as priorities for shale gas development. The first shale gas well was drilled in the Weiyuan gas field in Sichuan Basin in December 2009 and was completed in April 2010. In December 2010, the first horizontal well was drilled and production began in August 2011. In December 2011, shale gas was recognised as the 172nd mineral asset, which allowed it to be exploited as an independent mineral right in China; it has progressed to become a priority among industries and projects under development in the 12th Five-year Plan for 2011-2015 (2011-2015 十二五规划). As of the end of 2012, approximately 80 shale gas wells have been drilled in China, which have produced a total of 50 million cubic meters of shale gas. Total investment in shale gas has reached more than Rmb7 billion ($10.2 billion).

First shale gas auction

In June 2011, the Ministry of Land and Resources (MOLAR) held the first auction for four shale gas blocks in Guizhou Province and Chongqing City. Bids were submitted by state-owned oil and gas companies including: China National Petroleum Corporation (CNPC), China PetroChemical Corporation (Sinopec), China National Offshore Oil Corporation (CNOOC), Shaanxi Yanchang Petroleum (Group) Company Limited, as well as other state-owned enterprises including China United Coalbed Methane Corporation (CUCBM) and Henan Provincial Coal Seam Gas Development and Utilisation Company Limited (Henan CBM). In July 2011, one block was awarded to Sinopec and another to Henan CBM.