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China Accelerates Shale Gas Exploration And Development

China may hold a second and possibly a third auction of shale-gas blocks by the end of this year in an bid to accelerate the pace of exploration and development of the fuel, Pan Jiping, a researcher at the Ministry of Land and Resources, said recently.

There will likely be a “noticeable” increase in the number of blocks up for auction and participating companies in the future, Pan said, adding that the success of the first auction, which included blocks in Chongqing municipality and Guizhou and Hunan provinces, laid a solid foundation for future sales. China in late June held its first shale-gas auction, which received bids from six State-owned companies for four blocks.

China Petroleum & Chemical Corp (Sinopec) won the rights to explore the Nanchuan block, which covers parts of Chongqing and Guizhou. Henan Provincial Coal Seam Gas Development and Utilization Co will explore the Xiushan block, which includes portions of Chongqing, Guizhou, and Hunan province.

“The ministry is still under preparation. I believe the next round will proceed more rapidly and efficiently compared with the first auction, which was a revolutionary step forward for the sector,” Pan said, adding that the government is still very cautious and will not make bold moves.

Shale gas is an unconventional natural gas produced from shale. China is estimated to have 31 million square kilometers of recoverable reserves of the fuel.

Liu Tienan, head of the National Energy Administration, said in mid-August that China’s abundant shale gas resources are a significant contribution to the country’s energy needs. The 12th Five-Year Plan (2011-2015) includes exploration and development of shale gas as a key component of the nation’s strategic energy plan.

The current plan sets the framework for further development during the next Five-Year Plan starting in 2016, Liu said.

Natural gas will be an increasingly major energy source through 2030, during which shale gas will see the most rapid development, given surging demand for energy and growing empahsis on emissions reduction, according to a recent report released by Exxon Mobil Corp.

Compared with other regions of the world, the demand for natural gas in China will rise the most. The report that forecast daily consumption will exceed more than 880 million cubic meters (cu m) in 2030. That’s compared with 137 million cu m daily in 2005, according to the National Bureau of Statistics.

China, the world’s biggest energy consumer, aims to significantly reduce carbon emission partly by diversifying its energy portfolio to include cleaner energy resources and reducing reliance on dirty coal.

Sinopec said this week that unconventional gas will become a major force for the company’s growth and it will cooperate with overseas companies to accelerate shale gas exploration.

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China joins shale gas hunt

HONG KONG – China should accelerate the pace of its exploration for shale gas and other unconventional natural gas to cut emissions and reduce its increasing dependence on imported fossil fuels, experts and industry players said. 

China now relies more on imported oil than the United States. Its dependency ratio of foreign crude imports hit a record 55.2% in the first five months of this year, up from 55% in 2010 and 33% in 2009. The US’s dependence on imported oil is 53.5%. 

China’s domestic apparent consumption of petroleum increased by 10.3% year on year to 198 million tonnes from January to May, according to the latest data provided by the Ministry of Industry and Information Technology (MIIT). The “apparent consumption” represents the sum of net imports and output and can be taken as an index for the real oil consumption excluding inventory.
In the first five months of the year, the apparent consumption of crude oil increased by 8.5% year on year to 191 million tonnes. 

China has been a net importer of oil since the 1990s, and its oil imports have risen sharply due to its strong economic expansion. Its own output of crude oil has averaged around 200 million tonnes annually in recent years, while oil imports last year came to 239 million tonnes, up 17.5% on a year earlier, according to the General Administration of Customs. Crude oil imports rose 11.3% in the first five months of this year from a year earlier to 107 million tonnes, according to MIIT. 

The strong growth in both imported oil dependency and oil import volume raises concern for China’s energy security, said Lin Boqiang, director of the China Center for for Energy Economics Research at Xiamen University. 

“In recent years, the country’s dependency ratio of foreign crude imports has risen three percentage points each year,” said Lin, who expected China’s dependence on imported oil would jump to 60% by 2013 and even to 80% by 2030. 

“The nation’s rising dependence on imported oil is threatening the country’s energy security,” he said. “Taking the talks on natural gas and crude oil between Russia and China as an example, if a country’s oil import dependency reaches too high, the country would be put in a passive role. Even though Russia is not the main supplier of crude oil to China, production in parts of China will definitely be affected in case of a lack of its supply.” 

Talks between Russian gas giant Gazprom and China National Petroleum Corporation (CNPC) on the long-term delivery of natural gas through pipelines from Russia to China have lasted for five years without reaching a final agreement due to differences over pricing. Their aim is for Russia to supply 68 billion cubic meters of gas through two pipelines to China each year over a 30-year period.