That has sparked hopes that unlocking those resources could help meet China’s relentlessly growing energy demand and ease its reliance on heavily polluting coal-fired power plants.
But progress on China’s shale frontier has been slow. About 60 shale exploration wells have been drilled over the past two years, according to the consulting firm IHS CERA, about as many as are drilled in North Dakota every 10 days. And there has been no Chinese shale production.
China’s shale gas deposits may be large, but they are remote, and in most places, there is not enough water to provide for the hydraulic fracturing, or fracking, technique used to create cracks that unlock gas trapped in the rock.
More important, oil experts say, burrowing through China’s regulatory layers is no small feat. In the United States, independent oil companies bought mineral rights owned by private individuals, then pushed ahead with drilling and production. In China, lumbering state companies dominate the landscape, and mineral rights are owned by the state — although which state bureaucracy is in charge of regulation has been a matter of dispute.
“It’s not about the resource,” said an executive from one international oil company that has considered investing here, speaking on the condition of anonymity to preserve relationships with the Chinese government. “It’s about the above-the-ground factors.” An executive from another international oil company, also speaking on the condition of anonymity, called the Chinese National Energy Administration’s goal of producing 230 billion cubic feet of shale gas a year by 2015 and 3.5 trillion cubic feet a year by 2020 “absolute fantasy.”
“There's a lot of fantasy right now about the speed at which shale in China will scale. Almost none of the factors that allowed for ready expansion of shale in the U.S. are present in China — except, perhaps, the geology,” David Victor, director of the University of California at San Diego’s international law and regulation program, said in an e-mail. “It is the ‘above ground’ factors that matter often much more than geological factors below ground.”
China has never been a major natural gas producer or consumer. Natural gas provides just 4 percent of China’s total energy, compared with more than 25 percent in the United States according to the Energy Information Administration.
Much of that gas is supplied to major cities such as Beijing, where it helps ease pollution by burning more cleanly than coal. With rapid urbanization expected to last another decade or more, demand for natural gas is heading higher.