With several major breakthroughs in exploration and development, shale gas has recently become hot again. As a large reserve country, China has 21.8 trillion cubic meters of recoverable shale gas resources, but the current proven rate is only 4.79%, which has huge resource potential. At a time when China’s dependence on natural gas is increasing, the value of unconventional natural gas shale gas exploitation is self-evident. The breakthroughs in exploration and mining technology are encouraging, but more attention should be paid to the reform of prospecting right mechanism and the follow-up of related supporting policies.
Shale gas has recently caught fire again. With the release of several major discoveries in exploration and development in recent years, shale gas has gradually become the core growth point of China’s natural gas industry. At a time when China’s dependence on natural gas has climbed to 45.3%, the news is very interesting.
Industrial Development
At the end of March, Sinopec announced that significant breakthroughs had been made in the exploration and development of shale gas in Sinopec: Weiyuan (far) Rong (county) Shale Gas Field submitted its proven reserves of 124.7 billion cubic meters, and 1 billion cubic meters of production capacity would be built this year; Dongsha Shen-1, the first high-yielding shale gas well in Dingshan-Dongxi Block, with a depth of more than 4200 meters, produced 310,000 cubic meters of high-yielding gas per day, breaking through the buried depth of over 4,000 cubic meters. Fracturing technology for shale gas wells of 1000 meters.
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Two months ago, the China Geological Survey announced a major breakthrough in shale gas survey in Western Hubei, China. The amount of shale gas geological resources is 11.68 trillion cubic meters, which has a resource base of 10 billion cubic meters per year. Therefore, the western Hubei region is expected to become a new base for shale gas exploration and development and natural gas production in China, forming a “tripod” resource pattern with Fuling and Changning-Weiyuan in Chongqing, breaking the situation that China’s shale gas development is concentrated in the upper reaches of the Yangtze River.
Natural gas is the cleanest energy in traditional fossil energy. With the development of green and low carbon, China’s demand for natural gas is increasing.
In January this year, China’s oil and gas industry development report at home and abroad, published by the China Petroleum Economic and Technological Research Institute, showed that in 2018, China’s natural gas imports reached 125.4 billion cubic meters, an increase of 31.7%. For the first time, China’s imports surpassed Japan and became the world’s largest natural gas importer, with its external dependence rising to 45.3%. This means that nearly half of China’s natural gas needs to be imported from abroad.
Ju Jianhua, director of the Mineral Resources Protection and Supervision Department of the Ministry of Natural Resources, said that China’s recoverable shale gas resources amount to 21.8 trillion cubic meters, ranking first in the world. At present, the proven rate of shale gas in China is only 4.79%, and the potential of resources is huge.
Shale gas, a kind of unconventional natural gas, is stored in organic-rich shale and its interbeds, mainly composed of methane, which was previously considered difficult to develop economically and effectively. However, with the successful application of large-scale fracturing technology in horizontal wells, the development and utilization of shale gas has developed rapidly.
As a large reserve country, China has every reason to make great achievements in shale gas industry. Ju Jianhua said that from September 2014 to April 2018, in less than four years, China has discovered Fuling, Weiyuan, Changning and Weirong shale gas fields in Sichuan Basin. The cumulative proven geological reserves of shale gas have exceeded trillion cubic meters, with a production capacity of 13.5 billion cubic meters and a cumulative gas production of 225.80 billion cubic meters. China has become another country to realize large-scale commercial development of shale gas fields after North America.
At present, Fuling shale gas field is the largest shale gas field in China. Last March, Sinopec announced that Fuling Shale Gas Field has an annual production capacity of 10 billion cubic meters, equivalent to the construction of a 10 million tons of large oil field. In 2018, Fuling shale gas field produced 6.02 billion cubic meters of shale gas and sold 5.78 billion cubic meters.
Why can we develop rapidly?
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There is no doubt that the world’s largest reserves and huge market gap have promoted the rapid development of shale gas in China in just a few years. Among them, policy plays an important role in promoting. At the end of 2011, with the approval of the State Council, shale gas became the 172nd independent mineral in China.
In October 2013, the State Energy Administration promulgated the Shale Gas Industry Policy, which made it clear that the state would directly subsidize the shale gas production enterprises according to the amount of shale gas development and utilization. From 2012 to 2015, the central financial subsidy standard was 0.4 yuan per cubic metre, which was twice as high as that of CBM subsidy standard. During the 13th Five-Year Plan period, the subsidy standard for shale gas was adjusted to 0.3 yuan/cubic meter in the first three years and 0.2 yuan/cubic meter in the second two years.
At the same time, shale gas mining enterprises also enjoy policies such as reducing or exempting compensation fees for mineral resources and royalties for the use of mineral rights. From April 1, 2018 to March 31, 2021, the Ministry of Finance and the General Administration of Taxation reduced the tax on shale gas resources by 30%.
Meanwhile, great breakthroughs have been made in shale gas exploration and exploitation technology in China. “China has innovated and formed a series of practical cleaner production technologies suitable for the characteristics of shale gas development, realized cleaner production in the whole process of gas field exploration and development, and formed the theory of shale gas reservoir formation with Chinese characteristics, core exploration and development technologies, which laid an important foundation for the rapid development of shale gas industry in China.” Ju Jianhua said.
According to media reports, the cost of a single well in Fuling shale gas field, the largest shale gas field in China, has been reduced by more than 30% compared with the early development stage in 2014.
In the new breakthrough of Sinopec shale gas exploration and development, technological breakthrough is also one of the important highlights. In Dingshan-Dongxi block, Sinopec’s deep shale gas key test well, Dongshashen 1 well, produced 310,000 cubic meters of high-yield gas per day in high-quality shale gas reservoirs with a depth of 4270 meters, breaking through the fracturing technology of shale gas wells with a depth of over 4000 meters, laying a technical foundation for large-scale commercial development of deep shale gas.
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Kang Yuzhu, academician of the Chinese Academy of Engineering, pointed to the shale gas breakthrough of the Bureau of Geological Survey in Western Hubei, and said that the results of the shale gas investigation in Western Hubei were strategic breakthroughs and had a landmark leading role. The results generally reached the international advanced level, and some of them reached the international leading level.
Greater growth prospects are promising
At present, there are still some constraints in shale gas exploration and development.
Firstly, the investment scale of shale gas construction is large, the implementation cycle is long, and there are many uncertainties. The investment enthusiasm of some small and medium-sized enterprises has declined.
In 2011, shale gas was listed as the 172nd independent mine in China. Its original intention was to introduce multiple investors into the shale gas industry and implement a highly centralized system different from the natural gas industry. In 2011 and 2012, the former Ministry of Land and Resources held two tenders for the transfer of prospecting rights, of which 20 tender blocks attracted 83 enterprises. However, as the international oil price declined, the heat of shale gas in small and medium-sized enterprises declined greatly. The third shale gas tender was delayed until 2017. Previously, many enterprises that have obtained shale gas exploration rights have fallen into the strange circle of “circle without exploration” because of the excessive demand for funds and uncertain prospects.
Secondly, because shale gas reserves in China are generally deep buried and mostly in mountainous areas, large-scale operations are difficult to carry out, and exploration and development are difficult.
In addition, the experts said that although there is a lot of policy support for shale gas at the policy level, there is still a lack of management policies for shale gas exploration and development in China. Most of them still refer to the traditional oil and gas operation rules, so it is necessary to formulate more targeted regulatory policies.
The State Energy Administration (SEA) has proposed in the Circular on the Issuance of Shale Gas Development Planning (2016-2020) that efforts should be made to achieve 30 billion cubic meters of shale gas production in 2020 and 80 billion cubic meters to 100 billion cubic meters of shale gas production in 2030.
At present, it is still difficult to achieve this goal. However, under the pressure of resources and environment, shale gas will have more room for growth in the future.
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