Page 9 - AsianOil Week 35

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expressed concerns about the upstream sec- tor’s ability to achieve this sort of result. He told Reuters: “ e investment is still too small, as only a handful state-run companies are exploring [shale gas]. Technology progress is not fast enough.”
Research consultancy Wood Mackenzie also shares a more cautious outlook, releasing a new report on August 28 that reduces its forecasts for the country’s shale gas and coal-bed methane (CBM) production.
Revised forecasts
e consultancy lowered its overall gas pro- duction forecast for 2040 by 39 bcm to 325 bcm in 2040.
“While we are positive on conventional and tight gas output, the long-term growth of CBM and shale production looks to be challenging,” gas and LNG consultant Xueke Wang said.
While Wang applauded Sinopec’s e orts at the country’s largest shale gas development, the Fuling field in Sichuan Basin, she noted that replicating cost reductions at the eld elsewhere would be di cult, owing to “geological heteroge- neity”. She added: “Even PetroChina’s three shale gas projects in the same basin do not achieve the same economics as Fuling.”
Despite the government and majors’ mounting support for shale gas projects, Wang downgraded the consultancy’s 2040 shale gas forecast to 88 bcm – a 44 bcm reduction from its previous forecast.
With gas demand projected to top 673 bcm by 2040, Wang said: “ e overall reduction in China’s gas production outlook calls for greater need for imports in the long term despite a more modest demand growth rate. is should drive China’s growing appetite for LNG and hence in uence global gas spot prices.”
It is this growth in demand for foreign energy supplies, however, that has China’s energy plan- ners so unnerved.
Worst-case scenario
“China’s reliance oil and gas imports is growing too rapidly, with oil topping 70% and gas moving
toward 50%,” Reuters quoted Xiamen Universi- ty’s Lin as saying.
This ever-growing dependence has been brought into stark relief by China’s ongoing trade war with the US, which has made imports of tra- ditionally cheaper supplies of US lique ed nat- ural gas (LNG) too expensive. China imposed a 10% tari on US LNG in September 2018, before raising it to 25% in June.
While the country’s largest oil and gas pro- ducer, PetroChina, has said it wants its uncon- ventional gas production to expand by 14% this year to 46.8 bcm, it is also planning its invest- ments to ensure it can tap enough foreign gas to meet domestic demand.
e state major’s president, Hou Qijun, said August 29 that the company would diversify its imports to ensure domestic demand is not bot- tlenecked by the trade war. It intends to do this by focusing overseas investments in gas projects in countries that are part of the Belt and Road Initiative (BRI). Hou said the company would seek to raise investment in gas projects in Central Asia, Russia and the Middle East. e company’s overseas assets already account for 15% of its oil and gas output.
“ e US, as a major oil and gas producer, is highly complementary with China – a big energy consumer,” the executive said. “Had the trade war not been there, the US would have been a very promising gas supply growth source for China.”
He added: “As some 40 nations are expected to have the capacity to export lique ed natural gas in the future, barriers to US LNG export to China will not a ect our diversi cation strategy, nor China’s gas demand.”
e central government can talk about boost- ing domestic production to ease its reliance on foreign oil and gas, but PetroChina’s invest- ment strategies are indicative of the supply and demand realities of China’s gas market. Demand is being arti cially boosted by the state in an e ort to reduce coal dependence and help tackle urban air pollution across the nation. While out- put will grow quickly, it simply cannot keep pace with the country’s requirements.™
Week 35 04•September•2019 w w w . N E W S B A S E . c o m P9