"By 2015, initial large-scale production will be achieved, and shale gas production will reach 6.5 billion cubic meters per year." This was a key target outlined in the "Shale Gas Twelfth Five-Year Plan," published in March of last year. Since then, the number "6.5 billion" has become a symbol of both hope and pressure for many stakeholders in China’s energy sector.
However, more than half of the time has passed, and the actual output remains far below expectations. The development of the second round of shale gas bidding blocks has been slow and challenging. While major players like Sinopec and PetroChina have made some progress, the high costs involved have raised concerns. Many companies that entered the market through bidding face financial or technical constraints, leaving them in a difficult position.
The second round of bidding has now passed, and the third round is about to begin. At this critical moment, questions arise: How far has China come in its shale gas development? What breakthroughs have been made? What challenges remain? And what should be the core focus moving forward? After the initial enthusiasm around shale gas in 2012, it seems that the “golden age†of shale gas may require more patience and rational planning.
**Meeting the 6.5 Billion Target: A Struggle**
China’s shale gas industry is still in its early stages. While progress has been made, the gap between expectations and reality has become evident. According to data from the Ministry of Land and Resources, by the end of March 2013, total investment in shale gas exploration reached 7 billion yuan, with 130 wells drilled, including 46 geological survey wells and 55 vertical wells. However, actual production in 2012 was only around 30 million cubic meters, far below the 6.5 billion target set in the plan.
Technological progress has been noted, but no national standards have been established. Zhang Yousheng, director of the Energy Economics and Development Strategy Research Center, said the industry is still in its infancy, and setting overly ambitious targets may not be realistic. Guo Xinjiang, a senior engineer at Sinopec, added that it could take 3-5 years for large blocks to move from exploration to trial mining, suggesting that the Twelfth Five-Year Plan period is still largely in the early stage.
Li Yulong, a strategic management expert at CNPC, emphasized the need to focus on technology rather than setting unrealistic goals. He warned that current expectations are too high, and without proper progress, the targets may not be met.
**High Costs and High Hopes**
PetroChina and Sinopec have made significant strides in shale gas development, but at a steep cost. For example, PetroChina invested over 4 billion yuan in its shale gas demonstration zones, achieving commercial success with its first horizontal well in Changning. Sinopec also reported progress in the Sichuan Basin, with high-yield horizontal wells in Fuling.
However, the cost of developing shale gas in China is roughly two to three times higher than in other countries. Wang Qiang from Halliburton pointed out that factors such as low formation pressure, long drilling cycles, and lack of suitable equipment contribute to these high costs. As a result, PetroChina's shale gas operations are currently seen as costly and not economically viable on their own.
**Challenges for Private Players**
Many companies that won shale gas blocks through bidding face serious challenges. Of the 16 companies that won the second round of bids, most have struggled with limited capital, technical expertise, and experienced teams. According to data, progress in the second round has been slow, with only 46% of planned work completed.
Industry insiders point to three main reasons for the slow pace: complex geological conditions, lack of experience, and poor-quality construction teams. Additionally, the high investment required—three times that of conventional gas—has left many firms unable to meet their commitments.
**Looking Ahead: The Road to a Shale Gas Golden Age**
Despite the challenges, there is optimism. The government has introduced supportive policies, and domestic technology and equipment have improved. Experts believe that reducing development costs through innovation and efficiency will be crucial.
Huadian Group, one of the bidders, has already implemented cost-saving measures such as using “well factories†and optimizing fracturing techniques. Bao Shujing from the China Geological Survey estimates that per-well costs could drop to 40-50 million yuan within 3-5 years, making shale gas economically viable.
Another key issue is the overlap of shale gas resources with existing oil and gas blocks. To fully develop shale gas, cooperation between major oil companies and greater resource liberalization will be necessary.
At a recent forum in Chongqing, many companies expressed uncertainty about the future of shale gas. Only a small number of firms are willing to participate in the next round of bidding. Concerns about policy, technology, water use, and reserves remain significant barriers.
With the third round of shale gas tenders approaching, the question remains: Will this new wave of development finally open the door to China’s shale gas golden age? The answer may depend on how effectively the industry can balance ambition with practicality.
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