Sichuan Shale and the Chinese Appetite for Clean Fuel

Sichuan Shale and the Chinese Appetite for Clean Fuel

The People’s Republic of China has set for itself a target of producing 30 billion cubic meters (bcm) per year of natural gas from shale by 2020, and further out, a target of 80 to 100 bcm by 2030.

These are very ambitious numbers, especially since the shale gas industry in the PRC has gotten off to a somewhat disappointing start. The goal that the country’s Ministry of  Land Resources set for 2015 was 6.5 bcm, but actual production that year was only 4.5 bcm, or 44% short of plan.

Nonetheless, shale gas production surged by 76.3% in 2016, putting it at 7.9 bcm. It rose again in 2017, to 9 bcm. That ambitious 80+ goal for 12 years from now, though it still looks ambitious, surely doesn’t now look absurd.

China’s Long-Range Energy Picture

Two companies in particular have been driving shale gas production, PetroChina and Sinopec. PetroChina says that in 2017 its Sichuan Province reserves accounted for one-third of the national total, that is, 3 bcm. It also says that it expects to increase this production by more than 66%, getting 5.1 bcm out of Sichuan in 2018. It plans to do this by bringing 400 new wells online in that province this year.

Shale oil is important for China’s long-range energy picture, more important than may be indicated by the simple fact that it is now at 6% of total gas output. China suffers from a serious air pollution problem, and as a matter of policy it is trying to resolve this by moving toward ‘cleaner’ fuels: away from coal, toward natural gas.

China’s production of conventional natural gas (that is, gas coming from any non-shale reserves) has also increased, but not sufficiently to keep pace with the demand, so China has come to rely upon imported NG. The Chinese see shale gas as a way of avoiding a lose-lose choice between excessive reliance upon imports on the one hand and continued use of more pollutant forms of hydrocarbon on the other.

In mid-April the consulting firm, Wood Mackenzie, predicted that China will fall short of its 2020 goal. According to Wood Mackenzie, the PRC is on course to reach 17 bcm that year. Although that is well short of the plan, it would still represent an impressive near doubling of the 2017 number.

The gas is down there. Geologists estimate there is a total of 25.1 trillion cubic meters worth of reserves beneath China. It is ‘only’ a matter of getting it out of some difficult places.

What can we say about relevant geology of Sichuan and adjacent regions in China, where the action is?

India Collides with Asia

Sichuan is in the southwest of the country, just east of Tibet. Understanding what is distinctive about it requires some understanding of “plate tectonics,” that is, the movement of the plates, the chunks of the earth’s crust on which the continents rest.  India’s plate smacked into that of Eurasia about 55 million years ago. The Himalayas and the plateau of Tibet are the consequence of that collision, a bit like a very large scale version of a pile of dirt that has been formed in the front of a moving plough.

In geologists’ terms this collision took place at the beginning of the Eocene Epoch.

But it is still taking place, the Indian plate is still moving northeast, at a rate of 5 centimeters a year. The Eurasian plate is itself also moving north, but at only 2 centimeters a year. This means that the collision is still underway, and the layers of rock throughout south central Asia have been continuously reshaped throughout those 55 million years.

As a consequence, according to a report by the Office of Scientific and Technical Information, U.S. Department of Energy, the sedimentation of Sichuan basin is very complicated, with a lot of thrust fault zones (that is, areas in which older rock has been thrust above younger sediments of rock.) This situation creates a lot of gas filled reservoirs topped off by trap rocks, keeping the gas from escaping until clever humans find their way to it.

Exploration is moving out from its Sichuan focus, eastward into the neighboring province of Chongqing. The Fuling district of Chongqing is the site of a natural gas field discovered in 2014 and now being developed by Sinopec. Last year, Sinopec said its estimate of the Fuling reserves is 600.8 bcm, a considerable increase from an earlier estimate of 380.6 bcm.



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