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By Robert Rapier on Dec 5, 2011 with 7 responses

China to Embrace Fracking In an Effort to Ramp up Energy Production

The following is a guest post from OilPrice.com. The subject — China’s foray into hydraulic fracturing — was also the topic of an energy roundtable I participated in this past summer: Roundtable on China’s Energy Future. My view is that the more energy China can produce domestically, the better for everyone as it keeps some pressure off of international energy markets. President Obama apparently agrees, based on the 2009 shale gas technology initiative he signed with Chinese President Hu Jintao.

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China to Embrace Fracking In an Effort to Ramp up Energy Production

China is leaving no shale deposit unturned in its effort to develop indigenous energy resources.

On 24 November China’s Ministry of Land and Resources geological exploration department head Peng Qiming said during a press conference that China’s combined oil and natural gas output, 280 million tons in 2010, is projected to rise to 360 million tons of oil equivalent by 2015, a 23 percent increase in four years and will rise to 450 million tons by 2030, a 62 percent increase over 2010 production, impressive rises in production by any yardstick.

And Beijing authorities in their drive are embracing a controversial natural gas production technique that is coming under increasing government scrutiny in both the United States and Britain – hydraulic fracturing, or ‘fracking.” China has started drilling to meet an ambitious annual production target of 80 billion cubic meters by 2020 by which time the government is seeking to meet a target of generating 10 percent of its energy needs from natural gas and 15 percent from renewable sources and launched a national shale gas research center in August 2010.

In April the U.S. Energy Information Administration estimated that China has nearly 50 percent more “technically recoverable” shale gas than the United States, placing its reserves at 1.275 quadrillion cubic feet, 12 times the country’s conventional natural gas deposits, as compared with U.S. shale gas reserves of 862 trillion cubic feet.

Despite rising environmental concerns about fracking in both the U.S. and Europe, Chinese authorities up to now have shown no such hesitations. On 20 October in Shanghai China’s Ministry of Land and Resources Strategic Research Center deputy head Zhang Dawei said, “The government places high emphasis on developing shale gas and has been actively studying supporting policies,” adding that a national shale gas plan will shortly be announced and more than 10 shale natural gas blocks are to be offered to Chinese state and private companies a the second round of auctions.

Earlier this year price and supply fluctuations in China’s oil and coal imports triggered disruptive electricity blackouts, increasing the Chinese government’s interest in the country’s vast reserves of shale natural gas, which will likely prove to be a more stable and predictable energy source as the central government can more easily control the pricing for domestically produced energy supplies. An added benefit of developing the country’s shale natural gas reserves is that over time, Chinese shale natural gas will be cheaper than importing liquefied natural gas over long-distance pipelines from Central Asia as rising volumes come online.

There only remain those pesky environmentalists, not a current problem as China’s media is largely state-owned and shies away from contentious topics.

Ever eager to get a share of the Chinese market, on 17 November 2009 during a state visit to Beijing, U.S. President Barack Obama met with Chinese President Hu Jintao and agreed to share American shale gas technology and to promote U.S. investment in Chinese shale-gas development. The “U.S.-China Clean Energy Announcements” posted by the White House Office of the Press Secretary posted the same day stated, “The two Presidents announced the launch of a new U.S.-China Shale Gas Resource Initiative. Under the Initiative, the U.S. and China will use experience gained in the United States to assess China’s shale gas potential, promote environmentally-sustainable development of shale gas resources, conduct joint technical studies to accelerate development of shale gas resources in China, and promote shale gas investment in China through the U.S.-China Oil and Gas Industry Forum, study tours, and workshops.”

Well, if Zhang’s 20 October announcement is anything to go by, U.S. investment in China’s shale gas industry will not include allowing overseas companies in the upcoming sale of shale gas leases. Up to now China has auctioned off two shale natural gas blocks in southwest China to two Chinese companies, including state-owned giant China Petroleum and Chemical Corporation Ltd. (Sinopec), and plans to hold a second auction either later this year or early in 2012.

As a consolation prize for foreign energy firms, they can invest in and supply technology to Chinese domestic shale natural gas operators and developer. Despite the prohibition, Chevron Corp., BP Plc and Norway’s Statoil ASA are among international energy companies that have already begun talks to form joint ventures in China to tap shale gas assets.

What is Mandarin for “technology transfer?”

Source: http://oilprice.com/Energy/Natural-Gas/China-to-Embrace-Fracking-In-an-Effort-to-Ramp-up-Energy-Production.html

By. John C.K. Daly of http://oilprice.com

  1. By Muchos huevos on December 5, 2011 at 9:34 am

    Great!!! glad they can try whatever they need to help themselves, and avoid having to send their money to the America haters, we should at least implement the Pickens plan, and force detroit to make Natural gas/propane
    vehicles, plus start using our sea of oil before we will have no use for it.
    We should be in better shape if all that money would STAY here, instread of sending it away.

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  2. By sameer-kulkarni on December 5, 2011 at 12:57 pm

    There only remain those pesky environmentalists, not a current problem as China’s media is largely state-owned and shies away from contentious topics.

     

    He he, not only environmentalists but also Safety auditors & social activists.

     

    Check: http://en.wikipedia.org/wiki/M…..dent#China

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  3. By shecky vegas on December 5, 2011 at 7:54 pm

    Good luck poisoning your own people, China!

    …as if you ever gave a damn…

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  4. By Benny BND Cole on December 7, 2011 at 12:17 pm

    We may see global gluts of fossil fuels in five to 10 years.

    40 mpg is the new 20 mpg, and vehicles can run on CNG, not to mention methanol. So many options make sense at $4 a gallon, and at $6 a gallon, even PHEVs start to make sense.

    There is a ceiling on liquid fuel prices, and the good news is that ceiling is low enough to allow prosperity. I actually see a cleaner and more prosperous future, with just a little bit of leadership.

    Leadership? Well, we can hope!

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  5. By paul-n on December 7, 2011 at 1:24 pm

    Benny, I have to admire your eternal optimisim – no “dismal science” for you!

     

    But a glut of liquid fuels?  

    I doubt that, as soon as there is anything approaching an excess, it will get used for discretionary consumption.  While alternatives are being developed, fossil fuels are still the easiest choice, just becoming an expensive one.

    Even if the US doubles the mileage of the vehicle fleet, that will only bring it to where Europe is now, and China + India will be happy to use whatever oil we do not.

     

    As for glut of leadership, well, I’m with you there!

     

     

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  6. By Benny BND Cole on December 7, 2011 at 5:44 pm

    Paul-

    Well, it is true that the words “glut” and “shortage” are not supposed to be in the economist’s lexicon. There is only supply and demand and price.

    However, at one point after the $147 spike we had tankers full of oil, laying over for months in Malta, no home to go to. That would be called a “glut” by some.

    Add on, we may find there are many wells drilled in which the marginal cost of production is below the marginal revenue, but capital costs will be lost. This may happen to shale. To drillers, that might be considered a “glut.”

    I am an optimist when it comes to energy and man’s incredible ability to adapt and innovate and conserve.

    Yes, our leadership can make a grown man cry.

    I am ever reminded of the apparently permanent collapse of the Newfoundland cod fisheries, once the most prolific fishery in the entire world. Leadership we not have, in spades.

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  7. By paul-n on December 8, 2011 at 2:48 am

    The shale gas plays in the US certainly seem to be following that pattern – the capital is never recovered – except by soaking new shareholders who have been attracted to the “increased reserves”.

     

    I do agree we have the *ability* to adapt and innovate, but I don’t think we have the collective *will* to do so.  if there is any hint of personal sacrifice involved, everbody wants everyone else to do so first!

     

    And the leadership seems mainly interested in showing why their plan is better than their opponents, even though the iceberg looms large.  

     

    Had cod and chips for lunch today -very good- but that is west coast cod!

     

     

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