In-brief evaluation
September 30, 2024
Data supply: Advanced Resources International, Inc.
China stands as a formidable participant on the worldwide natural gas stage, rising not solely as a big pipeline importer however because the titan of liquefied natural gas (LNG) imports. Over the previous decade, the Chinese authorities has championed the exploration and improvement of unconventional natural gas sources, pushed by the twin imperatives of diminishing import reliance and bolstering energy safety.
Recent insights from S&P Global Commodity Insights (SPGCI) illuminate a outstanding milestone reached in 2023 by the China National Petroleum Corporation (CNPC). This 12 months marked the pioneering extraction of commercially viable shale gas from the Low Cambrian formation lurking beneath the Sichuan Basin, with depths surpassing a staggering 14,760 ft. The groundbreaking Zi 201 well surged forth with an preliminary yield of 26.1 million cubic ft per day (MMcf/d), a industrial price that heralds the daybreak of a big period in large-scale shale gas improvement.
Yet, amid this promising improvement, solely two nationwide oil behemoths of China—the CNPC and the China Petroleum and Chemical Corporation (Sinopec)—at the moment interact within the manufacturing of shale gas, predominantly extracting sources from the extra accessible Silurian Longmaxi formation throughout the Sichuan Basin. This present formation, a mean of 11,500 ft beneath the floor, stays markedly shallower than its Low Cambrian counterpart.
China’s foray into home shale gas manufacturing escalated impressively, averaging 2.51 billion cubic ft per day (Bcf/d) in 2023, an astounding leap from a mere 0.02 Bcf/d in 2013, as per SPGCI’s meticulous knowledge compilation. Since that pivotal 12 months, Chinese enterprises have enhanced their geological insights into shale formations and adopted cutting-edge hydraulic fracturing and automation methodologies, paving the best way for sustainable manufacturing development. However, caveats stay; shale gas constituted a modest 12% of China’s general natural gas output, which reached 21.7 Bcf/d in 2023, impeded by each geological challenges and price constraints. Meanwhile, imports surged, averaging 16.0 Bcf/d, which represented a considerable 42% of complete natural gas provide that 12 months, a dramatic enhance from 15% in 2010.
Data supply: S&P Global Inc., S&P Global Commodity Insights, 2024; Sinopec, Annual Report 2023
Note: Sinopec=the China Petroleum and Chemical Corporation; CNPC=the China National Petroleum Corporation
In a bid to incentivize this burgeoning trade, the Chinese Ministry of Finance, alongside the State Administration of Taxation, launched a preferential tax framework in 2018, slashing the useful resource tax on shale gas manufacturing from 6.0% to a mere 4.2%. This coverage, a lifeline for producers, has now been prolonged by December 2027.
Following the revealing of China’s formidable 14th Five-Year Plan in 2021, additional coverage directives have cemented the governmental backing for the development of unconventional natural gas sources. In 2023, manufacturing from these unconventional sources—spanning tight gas, shale gas, and coal-bed methane—averaged 8.6 Bcf/d.
Today, China finds itself amongst a choose group of countries—simply 4—able to producing industrial volumes of shale gas. The United States, Canada, and Argentina share this elite standing. Our World Shale Resource Assessments report from 2015 estimated that China harbors a staggering 1,115 trillion cubic ft of technically recoverable shale gas sources throughout its seven most promising natural gas basins, with a predominant 626 trillion cubic ft nestled throughout the Sichuan Basin. This southwest area reigns supreme in China’s shale leasing and drilling actions, endowed with an unparalleled amalgam of favorable geology, flat terrain for ease of entry, established pipeline networks, plentiful water provides, and proximity to main city gas markets. Yet, different areas of the Sichuan Basin current formidable boundaries—fractured geological buildings, difficult topographies, and distressing ranges of hydrogen sulfide (H2S) contamination hinder the drive towards industrial shale gas improvement.
Principal contributors: Faouzi Aloulou, Victoria Zaretskaya