China has made significant strides in its efforts to reduce its reliance on imported natural gas. As one of the world's largest importers of liquefied natural gas (LNG), the country is keen to improve its energy security.
Over the past decade, the Chinese government has heavily invested in unconventional natural gas resources to diversify its supply.
Breakthrough in shale gas production
In 2023, China National Petroleum Corporation (CNPC) successfully extracted shale natural gas from the Lower Cambrian formation in the Sichuan Basin.
This achievement marked the first time that commercially viable natural gas was produced from such deep shale formations, at over 14,760 feet.
The Zi 201 well initially produced 26.1 million cubic feet per day (MMcf/d), a significant commercial milestone that could lead to large-scale shale gas development in this deeper formation.
Shale gas production in China
Currently, only two Chinese national oil companies, CNPC and Sinopec, produce shale gas, mainly from the Silurian Longmaxi formation in the Sichuan Basin.
This formation, at a shallower depth of around 11,500 feet, has been the focus of most shale gas production.
Despite this, China’s domestic shale gas output averaged 2.51 billion cubic feet per day (Bcf/d) in 2023, up dramatically from 0.02 Bcf/d in 2013, thanks to advances in geological knowledge and hydraulic technology.
Challenges and opportunities
Although shale gas production has increased steadily, it still only accounts for 12% of China’s total domestic natural gas production, which was 21.7 Bcf/d in 2023.
Geological complexities and high costs have slowed the development of shale gas resources. As a result, China continues to rely on imports, which averaged 16.0 Bcf/d in 2023, covering 42% of its natural gas needs.
This is a significant increase from 2010, when imports accounted for just 15% of the supply.
Government support and policy
China’s government has implemented policies to encourage the development of shale gas. In 2018, the Ministry of Finance and the State Administration of Taxation reduced the resource tax on shale gas from 6.0% to 4.2%, a policy extended through December 2027. Additionally, the 14th Five-Year Plan, released in 2021, continues to promote the exploration of unconventional gas resources, further driving production growth.
China’s place in global shale gas production
China is one of only four countries, along with the United States, Canada, and Argentina, that produces commercial volumes of shale gas.
The country has an estimated 1,115 trillion cubic feet of technically recoverable shale gas, more than half of which is located in the Sichuan Basin.
This region is the heart of China’s shale gas activity due to its favorable geological conditions, infrastructure, and proximity to major natural gas markets.
However, challenges such as complex terrain and pollution issues in other parts of the basin have made development more difficult, with information from the EIA.
China’s progress in shale gas extraction is a crucial step toward reducing its dependence on natural gas imports and enhancing its energy security.
Continued advancements in technology and government support are expected to further accelerate growth in the country’s shale gas industry.
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