Government listing shale gas and gas hydrates as special category to allow more investors to participate in exploration as country looks to increase shale and CBM exploitation
China is putting extra effort into exploring and developing unconventional gas and has implemented a number of incentives to spur investment.
The government has listed shale gas and gas hydrates as a special category of natural resources, distinct from conventional hydrocarbons, opening the door to diverse investors as well as providing subsidies for the production of shale gas and coalbed methane.
Though the country has a long way to go to monetise the South China Sea's mass gas hydrates reserves, other unconventional resources — tight gas, shale gas and CBM — are off to an impressive start.
Of the 147.4 billion cubic metres of gas China produced last year, 62.8 Bcm was unconventional resources, including 36 Bcm of tight gas, 10 Bcm of shale gas and 6.8 Bcm of CBM.
Top producer
The PetroChina-owned and operated Changqing gas field is the country’s top tight gas producer, with output last year averaging 111.6 million cubic metres per day from 10,793 wells.
Anglo-Dutch supermajor Shell and France's Total are the two foreign companies producing tight gas in China’s Ordos basin, from Changbei and Sulige South fields, respectively.
Shell is looking to develop a second phase at Changbei to tap secondary tight gas reservoirs. The development scheme calls for building 26 well pads and infilling two existing well pads.
Offsite facilities include one gas processing plant and three gas pressure stations.
These facilities will enable the second phase to achieve peak production of 2.4 Bcm per annum.
The government has not identified tight gas, which refers to gas with permeability lower than 0.1 millidarcy, as an unconventional gas, though it is being explored and developed with unconventional techniques such as horizontal drilling and hydraulic fracturing.
Subsidy support
The country's largest tight gas producer, PetroChina, has been arguing for subsidy support for the sector.
The Changqing field in the Ordos basin accounts for about 80% of China’s tight gas production.
China hosts around 3.5 trillion cubic metres of tight gas in place, accounting for about 40% of the country’s total gas reserves, of which 1.8 Tcm is considered recoverable. About 90% of the tight gas reserves lie in the Ordos, Sichuan, Tarim, Junggar and Songliao basins.
For CBM, the government has moved to increase the subsidy by 50% to 0.3 yuan per cubic metre from the previous 0.2 yuan during the 13th five-year plan period (2016-2020).
The shale gas subsidy is now at 0.3 yuan per cubic metre, though the grant will be lowered to 0.2 yuan for the 2019 to 2020 period. Last year, China significantly boosted its CBM production by 51% to 6.8 Bcm, as major operators worked to increase activities in order to meet the government target for emissions reduction.
The government aims to further boost CBM production to 10 Bcm by 2020 and is working to attract more investors by delegating power to local authorities to launch licensing rounds for CBM blocks.
Last November, central China’s Shanxi province offered 10 CBM blocks to eight companies, including five private players in the first such round launched in China by a local government.
However, the government has yet to resolve overlapping claims of CBM and coal exploration rights that have hampered development.
By Xu Yihe Fri, 16 Mar 2018 00:00:00 +0000
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