China targets natural gas to supply 8% of energy by 2015 and increase from 4% now and needs to copy and adapt US natural gas success

China’s national planners enthusiastically back boosting natural gas production, which accounts for just 4 percent of the country’s total energy mix now. The government wants to double that share by 2015. This would make natural gas a larger contributor than hydroelectric in China and put it third behind coal and oil. The displacing 4% of coal would reduce emissions by 2%. This would help slow the growth of CO2 emissions in China.

The impact of a shale-gas boom in China will be enormous, with the potential benefits and likely environmental costs perhaps even greater than in the U.S. So far, though, the output in China has been a trickle because of the challenging geography and the monopolistic structure of China’s oil and gas sector. While about 200,000 of the horizontal wells used in fracking have been drilled in the U.S., China has about 60. China has 1,275 trillion cubic feet of shale-gas reserves, compared with 637 trillion cubic feet for the U.S.

Most analysts think it’s only a question of time before large-scale commercial shale-gas production starts in China. IHS Cera’s Zhou predicts the industry must travel a “long and winding road” well into the 2020s before China’s shale gas is an important domestic energy source. Martin Stauble, who runs Royal Dutch Shell’s exploration and production in China, is more optimistic: He says commercial development “is likely to be in a three- to five-year time frame.” Shell is working with CNPC in Sichuan and Shaanxi provinces, and spending about $1 billion annually on exploration in China.

China will struggle to score a commercial success with its shale gas due to difficult geology and the absence of risk-taking players.

In China, until recently only the three state-owned giants—Sinopec, China National Petroleum (CNPC), and China National Offshore Oil—bid on gas drilling projects. The latest auction for exploration leases opened up bidding to state-owned enterprises in other industries, and the winners included several power and mining companies.

THe US shale gas success was larger performed by wildcatters. A lot of small players. However, China needs to copy and adapt the US success to its geology.

China can ramp up the roads and pipeline construction to support a massive buildout. Those are infrastructure developments that China loves to do.

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