Technology Boost Needed for Chinese Shale Gas Sector

China has to improve its extraction technology and lower the cost in order to begin commercial production within five years, executives from major participating companies said.

The potential huge shale gas output is likely to change China's energy consumption structure over the coming decades, China Daily quoted Yun Gongmin, general manager of Chinese electricity giant China Huadian Corp, as saying.

"It won't take long for China to begin large-scale shale gas exploration. I expect it to happen in less than five years," Yun said on the sidelines of the annual session of the 12th National Committee of the Chinese People's Political Consultative Conference.

China Huadian was the biggest winner in the second auction of shale gas blocks' exploration rights at the end of last year. It won four blocks out of 20 scattered in central and southern provinces.

Yun said one of China Huadian's shale gas wells in Guizhou province has already generated natural gas, China Daily added.

"China Huadian is going to invest up to 2 billion yuan ($321 million) to explore shale gas reserves this year," Yun told China Daily, adding that Huadian is probably a non-oil company in the country to promote the shale gas business in the fastest pace.

China is estimated to have 25.1 trillion cubic meters of exploitable shale gas resources, making it the world's largest source, and exceeding the 24.4 trillion cu m in the United States.

However, immature exploration technologies, environmental pollution fears and high costs have been seen as major obstacles, China Daily said.

Fu Chengyu, chairman of China Petrochemical Corp (Sinopec Group) said that importing US technology has limitations as under Chinese conditions, exploration technology suitable for areas with a height of 3,000 meters above sea level is required.

In addition, the US owns a well-developed infrastructure, including pervasive pipe networks. "When shale gas wells start working, it will be easy for US counterparts to find the nearest pipe access. But in China, we have to build infrastructure, which pushes up our production cost," Fu said.