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China: Unconventional gas to play big role in China's gas market: report

https://www.chemnet.com   Jul 27,2010
Domestic unconventional gas production will account for over a quarter of
China's total gas supply by 2030 and unconventional gas, particularly shale,
will increase significantly to help meet China's strong gas demand growth,
Wood Mackenzie said Monday.


However, unconventional gas resources will take a significant time to
develop and therefore meeting its gas demand will require China to import
significant additional volumes of LNG and piped gas, particularly up to 2020,
the energy consultancy said in a new report titled "Race for Supply - the
Future of China's Gas Market."


"Development of indigenous unconventional gas is currently slow but we
forecast significant volumes of coal bed methane, coal-based synthetic gas and
shale gas to enter the market, reaching over 11 Bcf/d by 2030. This will meet
much of China's incremental demand by this time. In total, unconventionals
will account for over a quarter of total gas supply," Gavin Thompson, China
Gas Study Director for Wood Mackenzie said.


In 2008, China extracted 5.8 billion cu m of CBM, Platts reported
previously. The country's 2006-2010 CBM Development Plan targets 10 billion cu
m/year of CBM production by 2010. It is not currently producing any coal-based
synthetic gas or shale gas.


"Shale gas is the major growth story in China. As China's national oil
companies increase their unconventional gas activity, they will look for
partnership and technology in the initial phase of development, creating a
window of opportunity for qualified foreign players," Thompson said.


This is a near-term window of opportunity for international oil companies
to gain access to China's onshore acreage and to leverage skills honed in
North America, he added.


While domestic conventional gas supply will continue to grow, Wood
Mackenzie said it cannot keep pace with future demand in the current decade
and China will need to secure significant additional volumes of imported gas
in the form of both LNG and piped gas.


Wood Mackenzie has raised its forecast of China's LNG demand in 2020 to
46 million mt/year, up from its previous forecast of 31 million mt/year.


"This will expand the opportunity for LNG suppliers seeking to secure
markets, particularly those in Australasia," Thompson said.


However China's LNG import growth will be mitigated by the emergence of
indigenous unconventional gas. Consequently there will be a limited
opportunity for some LNG suppliers to secure long term supply or risk seeing
China disappear as a potential foundation buyer for their projects, he added.


China's gas demand is forecast to rise from 9 Bcf/d in 2009 to 43 Bcf/d
in 2030, a compound annual growth rate of 7.5%, with strongest growth
pre-2020, Wood Mackenzie said.


This strong demand growth will not purely be driven by gross domestic
product but a combination of factors including policies to reduce the
country's growing reliance on oil imports.


"This is important as the gas demand story is about displacing oil
products, not coal, in the industrial and residential sectors," Thompson said.


"Coal continues to dominate in power, although gas will increase its
market share in wealthier coastal provinces as local government supports a
cleaner fuel mix. As such, we think that industry will remain the largest gas
consumer in China through to 2030," he added.
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