By Guo Jiaofeng, Gao Shiji, Zhao Wenzhi, Dong Dazhong & Li Jianzhong, Research Institute of Resources and Environment Policies

Research Report Vol.17 No.2, 2015

In recent years, the “shale revolution” in the United States has resulted in a sustained increase of shale oil and gas production and an oversupply in the international oil market, leading to the sharp drop of oil price in the international market since the second half of 2014, less than 50 dollars per barrel, even lower than the cost of shale oil and gas exploration and production. In consequence, some US shale oil and gas producers were on the brink of bankruptcy. In addition, some international oil companies delay or cut investment in exploration and development. On one hand, they try to tackle problems brought by low prices and on the other hand attach more importance to reducing cost and increasing efficiency of oil exploration and production through innovating technologies and business models. In contrast, there is still much interest in exploring and producing shale gas in China. It is proposed in the Development Program of Shale Gas Industry in Chongqing (2015-2020), issued by Chongqing Municipal Government in January 2015, that the annual shale gas production in Chongqing will reach 20 billion cubic meters in 2020. Meanwhile, more interest is seen in places like Sichuan, Guizhou, Shaanxi, and Hunan provinces. In the first half of 2015, Ministry of Land and Resources will have the third round of open tendering on shale gas exploration rights. Therefore it is of particular importance to timely follow and analyze the latest market information, scientifically project the future production of shale gas in China so as to plan in advance and make careful planning for the development of China’s shale gas during the thirteenth Five-Year Plan period. With successful experience of shale gas development in the United States, along with the analysis and in-depth studies of several institutions, we believe that shale gas production in China will exceed 5 billion cubic meters in 2015 and is expected to reach 30 billion cubic meters in 2020, about 15% of domestic natural gas output.

I. Abundant Shale Gas Resources Meet the Basic Requirements of Large-scale Commercial Development

1. Shale gas resources are abundant and have good occurrence conditions

Formed onshore China from the Precambrian period to the Cainozoic era, and widely distributed in the main petroliferous basins in the north and large areas in the south, the abundant organic-rich shale deposits have good conditions for formation and enrichment. Based on the distribution and exploration of shale gas, China National Petroleum Corporation (hereinafter referred to as “CNPC”), the Strategic Research Center for Oil and Gas Resources of Ministry of Land and Resources, the Chinese Academy of Engineering, and US Energy Information Administration (EIA) have respectively assessed the shale gas potential in China. According to the latest assessment in 2014, there are 12.85 trillion cubic meters of technically recoverable shale gas in China.

Based on the assessment in 2011, and the distribution of shale resources, EIA estimated eighteen sets of shale gas resources in seven major petroliferous basins or regions onshore China in 2013, The results showed that there were 134.4 trillion cubic meters of shale gas in China, among which 31.6 trillion cubic meters were technically recoverable.

In 2012, the Strategic Research Center for Oil and Gas Resources of Ministry of Land and Resources organized 27 research institutes to assess the shale gas resources in 79 shale layers in 55 basins or regions in 5 major onshore areas. The results showed that China had 1.5 million square meters of favorable exploration area, 134.42 trillion cubic meters of shale gas resources, among which 25.08 trillion cubic meters were technically recoverable.

In 2012, the Chinese Academy of Engineering organized academicians in the field of oil and gas and experts in three major oil companies to estimate marine shale gas resources in China with analogy, actual gas content measurement and Delphi methods. The results indicated that there were 8.81 trillion cubic meters of recoverable shale gas which were mainly distributed in the Sichuan Basin and the peripheral areas.

In 2014, CNPC assessed shale gas resources in the key areas based on researches from 2011-2013 and the latest development in exploration. The results revealed that 12.85 trillion cubic meters of shale gas were technically recoverable, including 8.82 trillion cubic meters of marine shale gas, 2.23 trillion cubic meters of transitional facies-limnetic facies shale gas, 1.8 trillion cubic meters of lacustrine facies shale gas.

2. Shale gas development, though still in the initial stage, has achieved major breakthroughs and there are promising prospects

Since starting shale gas exploration in 2005, China has, by the end of 2014, invested over 20 billion yuan, drilled more than 400 shale gas wells producing about 1.3 billion cubic meters of shale gas with the average production of 100,000 cubic meters per day per well. Besides, China has completed a bunch of pilot tests concerning shale gas exploration, carried out initial assessment of the potentials of onshore shale gas resources, and selected favorable areas. There has been commercial development of marine shale gas in the Sichuan Basin. Promising prospects have been seen in developing marine shale gas in the southern areas. And substantial breakthroughs have also been seen in exploring continental shale gas in the Ordos Basin.

Moreover, industrial gas was found in Fuling Jiaoshiba, Changning-Weiyuan and Fushun-Yongchuan plays of the Sichuan Basin as well as Ganquan Xiasiwan play of the Ordos Basin. We explored Fuling Shale Gas Field, the first large-scale field with the production of hundreds of billions cubic meters in China, and established 4 demonstration areas of industrialization development of shale gas, obtained over 500 billion cubic meters of shale gas, and built the first 93.7-kilometer pipeline with an average annual production of 3.2 billion cubic meters (merging into the natural gas pipeline network surrounding the Sichuan Basin after connecting with the Na’an Pipeline). In 2015, we will complete the 141.3-kilometer Fuling Jiaoshiba-Shizhu Wangchang gas pipeline transmitting 6 billion cubic meters of shale gas per year and connecting with Sichuan-East Gas Transmission Pipeline.

3. Key technologies and supporting equipment for shale gas development have basically been ready

At present, China has basically developed the technologies for selecting and evaluating geological conditions of favorable exploration zones/strata, and established technological methods and standards system for assessing shale gas resources and the selected areas. We have initially developed the key technology systems of drilling and completing horizontal wells with long intervals (1500-2000 meters), such as well-bore trajectory control, cementing, drilling fluid, safety drilling for horizontal wells.We have formed massive hydraulic fracturing technology systems for shale gas reservoirs, such as fracturing treatment design of shale gas wells, configuration of slick water in volume fracturing, massive fracturing operation, staged fracturing of horizontal wells. We have basically formed supporting technology systems, including clustering perforation, drillable bridge-plug staged fracturing, cable pumping bridge plug, coiled tubing pumping bridge plug, and drilling plug for horizontal wells. We have initially formed factory-like technology systems of drilling and completing shale gas well groups, and drilling and completing horizontal well sections with a single bit and screw in one run①.Besides, we have initially formed supporting equipment and technical processes for shale gas development and basically formed a complete fracturing fluid system. The self-developed Model 3000 Fracturing Truck is leading in the world. … If you need the full text, please leave a message on the website.

①At present, it is feasible to deploy and control several batches of platform well groups in the same shale gas play. In a well group, there are 6-10 horizontal wells, which are drilled and completed with standardized equipment and services in the way of the production or assembly line.