China's Shale Gas Development Potential

Tyler Durden's picture

Submitted by Stratfor,

China's potential in shale gas production is nearly as staggering as its potential growth in demand for natural gas. The U.S. Energy Information Administration estimates that China possesses by far the world's largest reserves of technically recoverable shale gas. Although China's shale gas industry is not as advanced as the United States', it could be the most advanced outside of North America. China's target is to produce 60 billion to 100 billion cubic meters of shale gas by 2020, but there are severe limitations to hitting the target. China is more likely to produce somewhere around 25 billion cubic meters of shale gas by then. In total, China will realistically be able to access 275 billion cubic meters to perhaps 300 billion cubic meters of natural gas from land-based (both piped and domestic) sources by 2020. It remains unclear whether this will be able to satisfy most of China's demand. Should China's demand reach higher estimates, such as Barclay's 450 billion cubic meters by 2020 or the Chinese Ministry of Land and Resources' 380 billion cubic meters, China could be forced to import as much as 150 billion cubic meters of liquefied natural gas by 2020. 


That kind of demand could very easily overwhelm liquefied natural gas markets internationally, ensuring that liquefied natural gas supply diversification will not lead to lower prices. However, this is unlikely, because there will remain an intrinsic link between China's domestic supply and domestic demand. While China has been pushing for natural gas to offset coal and oil, Beijing still must balance two competing needs: the need for natural gas to replace those other sources and the strategic risks of overreliance on foreign sources of natural gas (as opposed to coal, which it can largely produce domestically). As a result, China's overall demand for imported natural gas -- including liquefied natural gas -- will be related to the success and pace of its shale gas development.

Additionally, the most likely scenario in which China's liquefied natural gas demand would increase dramatically is one in which liquefied natural gas prices do not skyrocket but are low enough that it would be worth importing large volumes of natural gas despite the strategic losses. Either way, China would still be importing small volumes of liquefied natural gas and has every interest in working with Japan, South Korea and other liquefied natural gas importers in order to manage prices. However, China's potential demand spikes leave those other liquefied natural gas importers worried -- especially those, such as Japan, that have few options other than importing liquefied natural gas.


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HedgeAccordingly's picture

A look at the natural gas future chart | $NG_F $UNG | |

DoChenRollingBearing's picture

Well, I hope the Chinese do have lots and lots of NatGas, and that they produce it.  The more the merrier.

Once I again I note that Peru has lots of its car fleet powered by gas, especially in Lima, why just today I took a cab that stopped to re-fuel with LNG (while going to talk with the editor of Peru`s weekly mining paper about gold).  We have very little of that kind of infrastructure in the USA, but they have it here...

Independent's picture

Great now that the Zio Nazis know this expect regime change in China so they can get to its natural resources.  Most likely a  breakup of China so they can pick up the little pieces like vultures.  They didnt succeed in Russia so its time to move on to China again.

VD's picture

buuuutttt PEAK OIL¿!


oh well...... hysterical Kunstler can go suck egg....again & again....(but then again he thinks fossil fuels come from [dinosaur] fossils LOL!)

CrashisOptimistic's picture

Oil has about 5.6 million BTUs per 42 gallon barrel of volume.

Nat Gas, in gas form, has 1/1000th of that amount 5600 BTUs.

So you compress it and can get that to a larger fraction of oil.  Or you can freeze it to LNG and get to about 65% of oil.

The problem with LNG is it's very cold and every day it sits in a tank, it's vaporizing from warmth, even when well dewared or insulated.  So you get loss from just sitting there.

There is no magic.  If LNG were magical it would have replaced oil a long time ago.

maskone909's picture

Imagin natty gas refuling stations in every home! Would be pretty sweet

Dewey Cheatum Howe's picture

They already exist if you have a vehicle that can run on natural gas. There are units they only cost about $500 or so that can be hooked off your gas lines into the house for just such a purpose. They just have to be hooked in front of the meter so the gas company can measure the usage for billing purposes. Same holds true for things like gas powered generators and barbeques also.

You can convert your existing vehicles to run on natural gas now for like $1400 or so. There are plenty of conversion kits all approved and regulated by the EPA on the market now as is. Only suggestion is if you do you need to periodically run the vehicle using gas to keep your fuel injectors from gumming up.

maskone909's picture

I wonder what the highest octane you can squeez out of natural gas for performence vehicle purposes

DoChenRollingBearing's picture

I don´t know the specific answer to your question, but they tell me here in Lima that the cars are a little under-powered, and that LNG is not appropriate for trucks running up into the Andes.

Dewey Cheatum Howe's picture

If you are fueling from your home you'd use CNG not LNG and for high altitude you'd most likely need the more compressed version. Same problem with gasoline you need special blends for higher altitudes.

As far as the equivalents go this is a good starting point.

One GGE of natural gas is 126.67 cubic feet (3.587 m3) at standard conditions. This volume of natural gas has the same energy content as one US gallon of gasoline (based on lower heating values: 900 BTU/cu ft of natural gas and 115,000 BTU/gal of gasoline).[15]

One GGE of CNG pressurized at 2,400 psi (17 MPa) is 0.77 cubic foot (21.8 liters). This volume of CNG at 2,400 psi has the same energy content as one US gallon of gasoline (based on lower heating values: 148,144 BTU/cu ft of CNG and 115,000 BTU/gal of gasoline. 

The 2400 psi CNG is probably what you need to run vehicles up in the Andes.

For further research as starting points for people who are interested.

For conversion kits and yes once you have the conversion kit installed the vehicle will still run on gas afterwards. They usually install a switch in the dashboard that allows you flip which fuel source gets used.

CrashisOptimistic's picture

Your question has terminology problems, but in general the answer is in a different post about 5.6 million BTUs for a barrel of oil vs 5600 BTUs for a barrel of gaseous form nat gas.

You want the same energy as what oil gives you, you have to burn 1000 times more nat gas. 

Go to the Honda Civic specs and look at how little trunk there is.  They compress the nat gas (CNG is Compressed Natural Gas) to cut into that 1000 times problem, and after they do that, they still have about 1/2 the range on the vehicle PLUS they ate up the trunk volume (of the conventional Civic) with CNG tank.

Oil is all powerful for a reason, that reason derives from physics, and only from physics.  Were there a magical workaround, it would already be in place.  There is no technological cure.  It is what it is.

Independent's picture

Yes nat gas refueling stations in every home, BOOOOOOOOOOOM and KABOOOOOOOM sounds good to me just dont live too close to me cause I like to smoke.

CrashisOptimistic's picture

1) Concern about foreign sources of nat gas is stupid.  They already import 6 million bpd of the ACTUAL GOOD STUFF, and somehow didn't care about foreign sources of that.

2) Now you know why the IMF is going around DEMANDING that country governments cease domestic subsidies for gas and oil/gasoline -- or forget bailout loans.  When it's subsidized, it gets burned.  Heaven forbid any brown or yellow people burn that stuff, though admittedly their latest demand is that Ukraine stop subsidies and they are white.  Point being, even the IMF knows joules matter and money doesn't.

3) China's domestic oil production level is a state secret.  That is all.

Fix-ItSilly's picture

Is this article worthwhile without considering the availability of water?

NOTaREALmerican's picture

Well, the Chinese have a pure free-enterprise run government, so they don't need worry about ruining anybody's drinking water.

thatthingcanfly's picture


For the 987th time, hydraulic fracking does not affect drinking water. Turn off the Matt Damon movie.

Independent's picture

Really now, tell that to my mom's well water which is contaminated by the fracking chemicals.  She was smart to have kept lab results from before they started drilling.  She drinks bottled water now payed by the company that drilled the wells around her community.

HappyCamper's picture

Which community?  What state?  Please back this up with something tangible or I'll just consider it more FUD and b.s. by watermelon "green" crowd that will say absolutely anything to further their agenda. 

Fix-ItSilly's picture

You really don't understand.  The issue is not about drinking water.  It is not about polluting water.  Fracturing requires water to "fracture" and therefore arid and desert regions that are shale structures won't be drilled.

Don't show your political and social bias.  Think about the business equation.

CrashisOptimistic's picture

Fracturing does require water.  On a multi well pad, the first well requires about 5 million gallons of water to frack it.

Then up comes oil (gas) and with it, water.  That water can be used on the next well on the pad. 

Fix-ItSilly's picture

Look at the China map.  Where are they going to get this water?  This article is incomplete or naive.

As for the other thought of liquifying a gas to be used as a fracturing liquid...  well...  why not skip all these intermediate steps and just liquify coal?  oh... yea...  we're in business to make money...

Stuck on Zero's picture

There might be a better solution.  Fracking can be done with liquid Carbon Dioxide.  Coal burning power plants can extract their CO2 and pump it through pipelines to the fracking regions where it is injected to open fractures and release the trapped natural gas.  An on-site extraction facility recovers the CO2 for re-injection.  Two issues are solved at once.


thatthingcanfly's picture

The availability of several million gallons of water per frack job might very well be a concern in those regions, as you stated.

My previous post was in response to a drive-by eco-terror remark by NotaRealAmerican.

You need to read more carefully.

skwid vacuous's picture

wow, all those dinosaurs would have been tasty snacks... "fossil fuels" ...LOL

HowardBeale's picture

"Nee how. Welcome to Venus."

Dewey Cheatum Howe's picture

BTW long term contracts are already in place to import LNG gas from Gulf of Mexico to China now in place with companies like Exxon-Mobil, etc. that they are just starting to pump also a giant LNG shipping hub is supposed to be getting built in Indonesia to store and then ship to various destinations to the whole Asian gas market in general.


CrashisOptimistic's picture

Just to be sure ppl know, the US is a net nat gas importer, and nat gas wells die much faster than oil, so if there was an actual economy functioning in the US, the import rate would be growing.

Think about that when you hear about proposals to export.

Dewey Cheatum Howe's picture

We got plenty of untapped gas with no one to sell it to right now except Asia at least until they finally do away with the export ban to Europe and we have an EPA and other entities doing everything possible to stymie production to the point if we wanted to be energy independent we can't because they keep throwing up too many roadblocks so production could equal consumption of other fuels like gasoline for starters then in turn we wouldn't need to import from places like Venezuela or Saudi Arabia but that would be too fucking easy now would it. It would also make it a lot harder to justify being a bunch of international control freaks when we don't need their gas....

buzzsaw99's picture

and yet they burn shitty dirty ass coal with unscubbed exhaust. fuk u very much.

Ms No's picture

I have in the past worked for oil, nat gas, nuclear and coal industries.  I am no scientist and can only speak for my observatios.  I went where the money was and could care less about talking any book.  I can promise you that coal is the cleanest of all of them at this point, not that any industry is clean. 

NG doesn't even have to hold to the clean water act.  I have seen open pits burned in oilfields and radioactive socks laying on the side of the roads in fracked oilfields.  I think we all are aware of the dangers of the nuclear industry.  Coal corporations, however, shit their pants if oil from a field truck hits the dirt, every pond on site tested by the feds constantly.  Hundreds of millions have been spent on scrubbers while prices were down.  True fear in one industry and near absolute abandon in the other.  Coal has fallen out of favor for the new NG scam...   Invest accordingly

Ms No's picture

I should note that I am not claiming sunshine and roses rises from coal plant smoke stacks, I have no idea what rises from them.  I am only trying to emphasize the obvious... the EPA is not levied equally.  If you watch that second utube video (bakken fail of the day, year in review)  and get past the annoying oilies parading themselves in the beginning.... take special note of the giant condom looking socks heaped on the truck.  Oh yeah, and explosions

Jack Burton's picture

Potential is just a word. Affordable recovery is the kep phrase. Gas and oil is no good if it's production costs don't match market forces. We need to see how these wells play out in the medium term, maybe profitable once drilled, for how long they remain that way is the key question in every shale gas play.

Ms No's picture

Thanks Jack, I was hoping you or Flak would show up.  If people haven't figured this one out yet there is no hope for them.

TDoS's picture

On Zerohedges main page right now, there is an article called, "The Dominoes Start to Fall in China," or something like that.  Technically recoverable isn't ECONOMMICALLY recoverable.  Let's see how much tight oil they can squeeze out with a dying economy.

Rodders75's picture

*** Great stock idea *** 

Shale gas is difficult to extract because of a lack of water in desert areas. 

Coal bed methane is a much better option.

The best way to play it is Sino Oil and Gas (702 HK) that operates in the Sanjiao coalfields.

Lots of very smart local investors are taking positions. 

2013 operating stats have already been released: production has risen 5x in the last 12m. The market hasn't reacted.

Financial results come out next week. Could be a catalyst. 

At least a 4 bagger.

You read it here first...

PS Can I be arrested for promoting stock ideas on ZH?



Rodders75's picture


Last point in article about Japan = reactor restarts have to be accelerated = buy the shit out of uranium miners, eg Paladin Energy (PDN AU)