SPECIAL REPORT • ENERGY
MONOPOLIZED: PetroChina owns most of China’s pipeline
nically recoverable shale gas resources,
nearly 50% more than the US. “To put it in perspective, the state of
Qatar has 900 tcf of gas reserves, which represent about 14% of the world’s known gas reserves,” said Peter O’Malley, managing director of HSBC’s Asia-Pa- cific Resources and Energy Group. Te figures may be revised upward as
research and drilling continue, said Anne- Sophie Corbeau, senior gas expert at the International Energy Agency (IEA). “If you look at the US, for example, the EIA revised drastically its views regarding shale gas,” she said. Last year, the agency more than doubled its estimate of techni- cally recoverable but unproved resources.
Compelling economics
Tis wealth of lower-carbon energy is especially appealing in China, where coal generates more than 70% of power and many of the country’s famously smoggy days. But energy security and price are probably the most compelling arguments for ramping up unconventional gas pro- duction. Although setting up drilling operations and infrastructure will require a big initial investment, domestic uncon- ventional gas should ultimately be much cheaper than imports. David Hewitt, regional head of oil
and gas for research firm CLSA, said liq- uefied natural gas shipped from Australia costs around US$13-14 per million cubic feet (mcf ) by the time it arrives in Shang-
32 China Economic Review • May 2011
hai, compared with almost US$12.5-13 per mcf for gas piped from Turkmenistan. Shale gas shipped from Shanxi Province would cost half that price or less. “For China, you either choose to buy
from an import source, where you take the security of supply risk and a signifi- cantly higher price, or you try to acceler- ate domestic unconventional, and I think it’s a no-brainer. You go for your domes- tic,” said Hewitt. In the US, shale production led to a
sharp reduction in annual gas imports – nearly one-third between 2007 and 2010. Te prospect of cheap domestic gas has undoubtedly sparked China’s interest. Te country aims to derive 8-12% of domestic energy production from natu- ral gas by 2020, up from around 3% cur- rently. Shale gas, CBM and tight gas are projected to make up about one-third of the 2020 total. However, most analysts see these fig-
Distribution curve
Shale gas resources Australia India China
110 37.9 63 107
Canada US
62 388 272.5 Technically Recoverable Shale Gas Resources Source: EIA, Oil and Gas Journal 862 Proven Natural Gas Reserves 1,275 396
ures as guidance rather than hard targets. “Neither the companies nor the govern- ment understand how [Chinese] shale is going to respond to drilling. Coal-bed methane targets in the previous five-year plan were nowhere close to achieved,” said Gavin Tompson, head of China research for energy consultancy Wood MacKenzie. While Beijing has presumably tasked
China’s national oil companies with ad- vancing unconventional gas, the goal will undoubtedly take a backseat in the short- term to maintaining national energy supply. Tis is especially true for PetroChina,
the listed subsidiary of China National Petroleum Corporation (CNPC), which is the largest oil company in China and the fifth biggest in the world. Te company leads its competitors
in capital and infrastructure, allowing it exert significant influence on the pace of unconventional energy development. Be- cause of its traditional focus on upstream exploration, CNPC controls most of the country’s pipelines, giving it a natural advantage in commercializing remote unconventional gas. It also set up China’s first shale gas research institute in late 2010. Te company entered two high pro-
file unconventional gas deals in the last year and drilled its first horizontal shale gas well in the Sichuan Basin in March, sparking expectations that it will ramp up
trillion cubic feet
Imaginechina
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68