Tech constraints could curb shale gas development

Environment, water considerations should also be taken into account

China is making an unprecedented effort to explore and develop shale gas resources, but the country will not achieve a breakthrough in the short term, experts have said.

Since China announced recently that it will launch the second round of shale gas exploration tenders on Oct 25, the topic has generated a lot of attention from domestic and foreign experts, government officials, investors, and heads of companies in the industry.

Zhang Yuqing, deputy director of the National Energy Administration, said on Sept 19 that China will strengthen cooperation in the energy sector, especially shale gas, with the United States, the country that became the largest natural gas producer in 2009 because of the rapid development of its shale gas exploration.

Speaking at the 12th US-China Oil and Gas Industry Forum, held in San Antonio, Texas, Zhang said the world's two largest economies should work together to maintain the stability of the international oil market and global energy security.

But at the World Economic Forum in Tianjin, Lin Boqiang, director of the China Center for Energy Economic Research at Xiamen University, said that because of China's shortage of water resources and its technology limits, the country will not achieve a breakthrough in the next two to three years.

"Rather than fossil fuel, water is the most precious resource for China, but it is not a problem for the United States, which has made a lot of progress in shale gas development in the past few years," he said.

"The current technology China has cannot solve the water problem."

Exploration of shale gas, or "fracking" as it's often called, has been controversial.

Experts suggest the process, which uses high-pressure liquid pumped deep underground to split shale rock and release gas, should only take place at least 600 metres down from aquifers used for water supplies, because of potential contamination.

The executive director of the International Energy Agency, Maria Van Der Hoeven, shares Lin's view.

She said that the water problem will be a big challenge for China's shale gas development.

"In Europe, there are different voices about shale gas development because people worry about environmental protection and land and water resources," she said. "Some countries, such as France, hold very negative views about shale gas development."

Lin said while technology is a problem for China right now, it can be addressed very quickly. However, the technology China can employ should use less water, he said.

Nevertheless, he said he is optimistic about the result of the second round of the tender.

Nearly 100 companies have decided to take part in the bidding process, including many listed companies, 21cbh.com reported on Thursday.

Private companies accounted for a third of all the bidders and will have a fair chance to compete against State-owned or central enterprises, said Zhang Dawei, director of the mineral resources and reserves evaluation center at the Ministry of Land and Resources.

The tender will offer 20 blocks, about 20,000 square kilometers, to Chinese energy companies or Sino-foreign ventures with Chinese companies taking the majority stake, according to the Ministry of Land and Resources.

A successful bidder can get three-year exploration rights to one block for shale gas resources.

Houston-based US energy giant ConocoPhillips Co gave Chinese representatives a tour of its shale gas project, Eagle Ford Shale, during the US-China forum.

According to the US media, the company plans to expand its business in China, especially in shale gas exploration projects. Experts said Conoco-Philips plans to achieve an annual output of 229.5 billion cubic feet by the end of 2015 from its shale gas projects in China.

Canada pays close attention to the development of shale gas resources because it is a cleaner fossil energy, said Christy Clark, premier of the Canadian province of British Columbia, during the forum in Tianjin.

She said major changes are taking place in the world's energy field, and it is important for government leaders to ensure a good energy structure will be formed.

China plans to pump 6.5 billion cubic meters of shale gas by 2015, according to the country's 12th Five-Year Plan (2011-15) on shale gas exploration. It plans to reach an annual output of 60 billion to 100 billion cubic meters by the end of 2020.