Assessing China's Shale Gas Capabilities

China Petroleum and Chemical Corp. (Sinopec) on March 7 announced a new development in its efforts to extract natural gas from shale rock formations. According to Sinopec, a shale gas well located in the Sichuan Basin's Yuanba field recorded a flow rate of 507 thousand cubic meters per day, the highest flow rate yet recorded in China. The announcement means China is one step closer to tapping Yuanba's estimated production capacity of 3.4 billion cubic meters (bcm) per year by 2015.

China produces more natural gas — about 94 bcm per year — than all but six other countries. But because China is the world's largest energy consumer, natural gas accounts for only 4 percent of overall consumption. At present, China heavily favors coal over all other energy sources; it accounts for roughly 70 percent of the country's energy needs. To help right this imbalance, Beijing is looking to increase its natural gas consumption by 6 percent within the decade. This will require that Beijing continue to import both natural gas and liquefied natural gas from abroad. It may also require increased shale gas exploration and development at home, such as that in the Yuanba field. China may succeed in developing shale gas production in the future, but several factors will prevent it from doing so in the short term.