Posted by: mulrickillion | February 6, 2012

A New Direction for China’s Massive Shale Gas Reserves

Shale Gas Extraction

By Keith Schaefer, Geopolitical Monitor, Jan 25, 2012 —

Oilprice.com, January 25, 2012

Summary

It’s estimated that China holds more natural gaslocked in its huge shale reserve – than the U.S.

Analysis

And while the country hasn’t yet begun commercial production, a new Chinese law has just given the green light to start allowing North American companies to develop shale gas inside its borders — where natural gas prices are significantly higher than North America’s.

In short, China recently designated shale gas as an independent resource, which means that smaller energy companies – and this could include some from outside of China – will be able to develop the resource in the country.  As I said, China has NO commercial shale gas—but big reserves.

China’s Ministry of Land and Resources did this to bring more firms into the sector, according to Reuters. The Asian country’s energy sector is currently dominated by massive Chinese companies like PetroChina.

Xinhua News Agency cited a government official as saying China would seek to launch a second round of shale gas tenders in early 2012—i.e NOW.

China only uses clean burning natural gas for 4% of its energy supply, compared to 20% + for most of the modern world – and it is already the third largest consumer of natural gas in the world (after USA and Russia).  They have a goal of getting to 10% by 2020.  China is increasing their gas supply now via pipelines from foreign countries like Turkmenistan, Kazakhstan, Uzbekistan, Myanmar and Russia.

Natural gas prices vary widely across the country, as they are subsidized in some areas to keep inflation low.  But in Shanghai you can now get $12+ per mcf and I have heard as high as $22/mcf—one of the best prices in the world (North American LNG export terminal proponents are salivating…).  Price liberalization is increasing.

Firms from outside of China will NOT be allowed to participate in the tenders.

However, outside firms will be able to partner with the Chinese companies that win them.

This move could have major implications for any companies that partner with the winning Chinese firms as the Asian nation has an incredible amount of shale gas reserves.

The U.S. Energy Information Administration estimated that there was 1.275-QUADRILLION-cubic-feet-worth of “technically recoverable” shale gas in China. By comparison, the U.S. – which has led the way with the development of shale gas – has “only” 862 trillion cubic feet. . . .

A New Direction for China’s Massive Shale Gas Reserves – Geopolitical Monitor

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