(Adds analyst's comments, background)
BEIJING Aug 7 China has halved the quantum of
shale gas it expects to produce by 2020 after early exploration
efforts to unlock the unconventional fuel proved challenging,
according to an industry website and a government source.
China, believed to hold the world's largest technically
recoverable shale resources, is hoping to replicate the shale
boom that has transformed the energy landscape of the United
About four years of early evaluations and drilling have so
far yielded one large find - Fuling field - in the most
prospective gas province of southwest Sichuan, but experts say
the Fuling success is hard to repeat due to complex geology and
high cost of production.
Citing Wu Xinxiong, the head of China's National Energy
Administration, industry website www.cpnn.com.cn reported that
China aims to pump 30 billion cubic metres (bcm) of shale gas by
2020, versus an earlier goal of 60-80 bcm mapped out in 2012.
"The previous targets were more of a vague prospect, a hope.
30 bcm is a more realistic goal," said a government source who
was briefed on the new target.
The revision, which is pending government finalization,
would be negative for oil service sector companies that were
hoping to cash in on the major drilling activity needed to reach
the earlier target.
"This is clearly negative for sentiment for some of the
China oil service sector firms such as Anton Oilfield
," said Scott Darling, head of Asia Oil and Gas
research of JPMorgan in Hong Kong. "This admission on shale gas
reflects the challenges facing China's natural gas market."
It also means China would continue to focus on tapping
easier-to-unlock gas resources, such as tight gas, which the
Chinese oil firms are more experienced in, to reach a
government-set total gas supply target of up to 420 bcm by 2020.
China's tight gas output may hit 80 bcm by 2020, according
to forecasts by the China Academy of Engineering, doubling its
estimated output of 40 bcm in 2013.
The new 30 bcm shale gas target would mostly be contributed
by the country's top two state oil firms, PetroChina
and Sinopec Corp, experts have said, as they hold the
majority of the country's oil and gas blocks, as well as the
The government's efforts, led by the Ministry of Land and
Resources, to open up the shale gas sector to independent
players have had small success, as the blocks the ministry has
to offer are of poorer quality and would entail hefty
Attempts by international firms to participate in the shale
gas development have not been wholly fruitful either, with Royal
Dutch Shell and Hess Corp the only foreign
firms that have landed production sharing contracts, while most
of them, including Exxon Mobil and BP, have
barely progressed beyond the preliminary stage of studying the
(Reporting by Chen Aizhu and Judy Hua in Beijing, Charlie Zhu
in Hong Kong; Editing by Muralikumar Anantharaman)