China attempts to shake its dependence on coal by turning to shale gas

Once an exciting prospect on the international energy scene, China’s long-awaited shale gas boom has failed to materialise, with interest waning as oil prices fall. Eventually, however, the country’s hunger for energy will trump all other concerns

Prior to its use with oil, the technique of fracking was actually pioneered for use in shale gas extraction; Mitchell Energy produced the first shale gas in the north of Texas in 2000. The technological process behind fracking involves extracting gas from sedimentary rocks, through a mixture of horizontal drilling and hydraulically fracturing rocks – hence the name ‘fracking’. Since 2000, natural gas production has surged, lowering the cost of the energy source around the world. Increasingly, it is now favoured over other cheap sources of energy such as coal. However, despite a crash in prices – as happened with the fracking revolution in petroleum oil – production has not fallen in a major way. Rather, shale gas is set for a continued boom.

According to Allied Market Research, The global shale gas market is expected to reach $214 billion by 2022, registering a CAGR of 14.4% during 2015 - 2022. As any observer of energy markets will know, the US has stormed ahead in the extraction and use of shale gas, becoming by the far the world’s largest producer. However, while it has a technological and commercial lead for now, it is far away from a monopoly on accessible reserves of shale gas. According to Advanced Resources International’s World Shale Gas and Shale Oil Resource Assessment report, prepared for the Energy Information Administration (EIA) in 2013: “Two-thirds of the assessed, technically recoverable shale gas resource is concentrated in six countries: the US, China, Argentina, Algeria, Canada and Mexico.” Canada and Argentina have since commenced large-scale extraction of their shale gas reserves.

China, meanwhile, has only steadily increased its ability to extract shale gas in recent years. And yet, although China only produces a small amount of shale gas now, its reserves are estimated to be 1.7 times larger than those of the US. This means China has the largest reserves in the world, as well as a growing population and economy that will require their use. Currently heavily reliant on coal for its huge and growing needs, natural gas is seen in China as a cheap and clean alternative.

The Chinese state relies on the steady performance of the economy to legitimise, in the eyes of its citizens, Communist Party rule. At the same time, tied to this is the guarantee of improving living standards. While coal has definitely boosted living standards in some regards, air quality has become an increasing concern for Chinese citizens. Transitioning from coal to liquid natural gas promises to provide a practical solution, mitigating the effects on air quality without forsaking the cheapness and abundance required for China’s economy and growing prosperity. However, since 2015, China’s shale gas development has stalled. International firms, essential for its development, have been pulling out of agreements and partnerships, raising the question of whether China’s purported shale gas boom is just a paper tiger.

Source: http://www.worldfinance.com/markets/china-attempts-to-shake-its-dependence-on-coal-by-turning-to-shale-gas