China’s natural gas demand continues to grow
China’s government is continuing to push for natural gas as a major energy source in order to reduce air pollution tied to coal-fired power plants, according to a U.S. government report Monday.
Natural gas accounted for only 4.9 percent of China’s total energy consumption in 2012, but that share is projected to grow to 8 percent by 2015 and 10 percent by 2020. China’s large investment in natural gas production and infrastructure along with a growth in imports will enable that growth according to the U.S. Energy Information Administration.
The boom already has caught the eye of American companies looking to help China exploit its massive and complex shale reserves. China holds the largest reserves of technically recoverable shale gas in the world, although actually getting to the gas won’t be easy, the Energy Department agency noted.
China’s natural gas production has more than tripled since 2003, and reached 3.8 trillion cubic feet in 2012, the EIA estimated. The Chinese government has set a production target for 5.5 trillion feet of natural gas per year by the end of 2015. Most of that growth will come from large fields in north central and western regions, as well as offshore reserves in the South China sea, according to the U.S. report.
Still, China will have to import a large portion of its gas. The country’s natural gas consumption has grown at an annual rate of 17 percent since 2003, overtaking the amount of natural gas produced domestically in 2007 and reaching 5.7 trillion cubic feet in 2013. Imported natural gas met a third of China’s demand in 2013, up from 2 percent in 2006, the EIA reported.
The country has also invested in pipeline infrastructure that will link production areas with coastal regions and allow for more imports. In 2013, China imported 974 billion cubic feet of gas from Turkmenistan, Uzbekistan and Kazakhstan. In May, China finalized a $400 billion deal with Russia for the purchase and transport of eastern Russian gas through a proposed pipeline. The deal could bring as much as 1.3 trillion feet of natural gas to the country each year starting in 2018, according to the EIA report.
Australia's Cooper Basin, in the southeast part of the country, could be a major source of shale gas. But due to a labor shortage, the cost of drilling and completing a shale gas well there is two to three times the cost of doing so in the U.S., according to Accenture.
The Neuquén Basin in central Argentina has the greatest unconventional resource potential outside the U.S. and Canada, according to Accenture. The basin has a strong road network, but the economic climate in Argentina makes foreign investment a challenge.
The Burgos Basin, just south of the U.S.-Mexico border, is believed to be a continuation of the Eagle Ford. The Mexican government has opened up the energy sector to foreign investment, but security remains a risk.
Poland's Baltic Basin contains shale gas and shale oil and has an existing natural gas pipeline, according to Accenture. But the country has an uncertain tax regime which could prompt hesitance by investors.
The West Sibera basin is the largest petroleum basin in the world by geographic area, according to Accenture, and flat production in Russia could contribute to tight oil development. But the political environment could cause also slow some foreign investment.
The South Ghawar Basin in Saudi Arabia has major unconventional gas reserves and the infrastructure to handle gas transportation. Saudia Aramco could substitute the oil it provides to electricity generators with that natural gas, and then sell the crude on international markets, according to Accenture.
The Sichuan Basin is the largest shale gas basin in China, but it sits below a mountainous area that's hard to access. About 80 percent of the best acreage belongs to the country's four national oil companies, according to Accenture.
The Karoo Basin in South Africa has shale gas, but development has been slowed due to local concerns about the environmental impact of unconventional drilling, according to Accenture.
The Bowland Basin in the United Kingom is a potential source of shale gas that could be buoyed by the government's steps to reduce the effective tax rate on production income. There are active non-governmental organizations, however, that vehemently oppose unconventional development.