Tag Archives: China

Time to seize a prosperous future fuelled by natural gas

Compared with coal, natural gas produces half the carbon dioxide, less than a third of the nitrogen oxide and just one per cent of the sulphur dioxide, with virtually no particulates. That China is looking to import LNG from B.C.’s shale gas is good news for both Canada and for the Earth’s atmosphere. But LNG will only slow China’s massive coal-fired power growth. Here’s the really good news. According to the U.S. Energy Information Administration (EIA), China possesses the world’s largest technically recoverable shale gas reserves that, at 1,115 trillion cubic feet, are almost twice as large as Canada’s. These vast resources remain undeveloped due to the early stage of Chinese recovery technology. That’s why the University of Calgary’s announcement of a new Canadian/Chinese Research Centre aimed at unlocking that potential is so newsworthy. At the signing ceremony in Beijing on October 23, U of C President Elizabeth Cannon stated that the project “will help China move from a coal economy over to gas.”

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The geographic proliferation of shale gas and tight oil is inevitable

This article in the Globe & Mail is worth a quick read. Though the proliferation of technologies for shale gas and tight oil will spread around the world, it take more then just technology to make the process of extracting these resources work. Mainly, water. For example, China may have more shale gas then that found in all of the USA, but its in the dry arid eastern regions where water is scarce. But with time, this too is changing with the evolution of new technologies that recover and recycle 99% of the fluids used in the fracking process. Time will tell but history has shown that opportunities are created by providing solutions to problems.

The geographic proliferation of shale gas and tight oil is inevitable

Globe & Mail (Source) This question keeps getting repeated: “Will shale gas and tight oil technologies proliferate beyond North America?”

Of course they will. There is no precedent for game-changing innovations in any business to respect territorial boundaries. So some remaining questions are, under what conditions will shale gas and tight oil be developed in other countries, how long will it take, and where first?

With respect to necessary conditions, it seems Texas has the right stuff. At a major conference in Dallas last week, a few thousand exuberant U.S. oil and gas executives were gushing over recent production growth from unconventional resources. North Dakota’s Bakken seems like yesterday’s news as attention now shines on the productive oil potential of the legendary Texas Permian Basin.

The stock, U.S. oil man’s answer to what drives such domestic exploration frenzy is the American principle of landowners’ mineral rights – if you own the land on the surface you also have title to the oil and gas beneath your feet. This alignment of financial interests between private landowners and oil companies lubricates the wheels of capitalism like nowhere else. Ergo, the converse argument goes, we are unlikely to see meaningful shale gas or tight oil development in other parts of the world, where no such subsurface benefits accrue to the landowner. But there are flaws in this line of thinking.

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China may have largest shale gas reserves

The global potential of shale gas continues to be more apparent as countries outside the USA, and Canada begin to realize the potential of shale gas to meet part of their growing energy needs. China may have the largest shale gas reserves in the world, and their huge energy potential in this energy hungry country will not go unexploited. The USA started to work with China back in November 2009, when US President Obama, and Chinese President Hu Jintao announced a shale gas initiative (See HRN: Obama announces shale gas initiative with China).

On July 30, 2012, China’s Ministry of Land and Resources reportedthe world’s minable shale gas reserves are estimated to reach 187 trillion cubic meters, with more than 36 trillion cubic meters in China.

China’s interest in shale gas exploration is increasing with an estimated output of 6.5 billion cubic meters by 2015, according to Liu Tienan, head of the China’s National Energy Administration (Source: China Daily)

 

China eyes tech breakthrough before shale gas leap

The following story is a must read for those interested in fully understanding China’s current situation for unlocking its vast wealth of shale gas.

BEIJING – (Source: National Post) China wants to identify the right technology to unlock its potentially large shale gas resource in the next few years, aiming for a leap in shale production by 2020, two years after it embarked on a search of the unconventional fuel.

Top energy agency, the National Energy Administration (NEA) officially unveiled on Friday a target to produce 6.5 billion cubic metres (bcm) of shale gas by 2015, or roughly 6% of China’s current total gas production.

But it intends to dramatically boost output to 60-100 bcm in 2020, a level some experts say is over-ambitious as it faces techonological, environmental and regulatory roadblocks.

“The U.S. technologies may not be fully applicable in China’s shale gas formation, they need to be revamped,” Zhang Yuqing, NEA’s head of Oil and Gas Department, said.

“The main task in the 12th five-year period is to lay a good foundation, especially some key technologies in shale gas exploration and development.”

China started the shale push in late 2009, inspired by a shale boom in the United States. Its state energy firms have since then entered multi-billion-dollar shale deals in the United States with Chesapeake Energy and Devon Energy Corp.

At home companies have drilled several dozens of wells and brought in firms such as Royal Dutch Shell, Chevron Corp and Hess Corp for joint studies.

But China has yet to start commercial shale production, though it is widely believed to hold the world’s largest shale resource.

The Ministry of Land and Resources revealed early this month China may hold 25.08 trillion cubic metres (tcm) of potentially recoverable shale gas resources. That compared to a U.S. Energy Informationa Agency’s forecast in March 2011 at some 36 tcm.

NEA’s Zhang said foreign firms can enter product sharing contracts with Chinese firms or provide engineering services.

Shell, which has done more exploration works in China than the rest of foreign firms – having drilled an estimated five wells in the southwest Sichuan basin, has yet to land a PSC contract with partner PetroChina 0857.HK, an industry executive has told Reuters.

China aims to complete an evaluation of national shale gas resource potential, make shale gas technology improvements, and localise the manufacture of major equipment by 2015. It will also establish industry standards and perfect government policies, according to the NEA plan.

Exploration will focus on finding 600 bcm of proven geological shale gas reserves and 200 bcm of recoverable deposits by 2015.

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China Plans Subsidies to Tap Shale Gas Reserves Larger Than U.S.

As Americans debate about shale gas, China is moving forward to tap its own massive reserves of shale gas. And when they do and if they offset a good percentage of coal power generation  with natural gas power generation, the world will witness first hand the positive environmental impact this transition will have on the air people breath in Beijing.

According to Zhang Dawei, deputy head of the Strategic Research Center at the Ministry of Land and Resources, China will produce 6.5 billion cubic meters of annual output by 2015 and 80 billion cubic meters by 2020. China currently does not commercially produce any shale gas.

The U.S. Energy Information Administration (“EIA”) stated in April that there may be as much as 1,275 trillion cubic feet (36 trillion cubic meters) of shale gas in China. That is 12 times the country’s conventional natural gas deposits. The EIA estimates that China’s “technically recoverable” reserves are almost 50 percent more than the 862 trillion cubic feet held by the U.S. – the largest producer in the world.
Bloomberg News via the Sanfrancisco Chronicle:

China encourages investment in shale gas exploration

CHENGDU — (Source: China Daily) China will encourage investment from various sources into the exploration and development of shale gas, an official said on Sept 25, as the world’s second biggest economy seeks to diversify its energy sources.

Enterprises without qualifications for shale gas exploration can join tenders for exploration projects in cooperation with qualified ones, said Che Changbo, deputy head of the oil and gas resources strategic research center of the Ministry of Land and Resources, at a forum here.
He said competition will be fully introduced in the development of shale gas, adding that the government will speed up making laws on managing the resource and improve technological standards on its exploration and development.

Shale gas is an important unconventional source of natural gas. Most of China’s shale gas reserves exist in the country’s South and Northwest.
China has 36 trillion cubic feet (about 1 trillion cubic meters) of exploitable shale gas, outstripping the United States, according to a 2011 report by the US Energy Information Administration.

The government should boost investment in scientific research as China lacks key technologies to develop shale gas, said Che.
China aims to diversify its energy sources and save more energy as its economy forged ahead with an annual rate of 9.5 percent in the second quarter of this year.

The government plans to cut energy consumption per 10,000 yuan ($1,563) of gross domestic product (GDP) by 16 percent in the 2011-2015 period.

China Daily: China encourages investment in shale gas exploration

Bloomberg: Poland Targeting Shale Gas With Exxon, Chevron to End Russian Dominance

For over  a year, HRN has been writing about the far-reaching geopolitical impact shale gas will have on various parts of the world. Back in April 2010, we referenced a Times article that was picking up on the impact Poland’s shale gas reserves will have on eastern Europe and that country’s relationship with Russia.

See HRN: Natural gas to bring about far reaching geopolitical changes –  Sept 2010

When U.S. President Barack Obama visited Poland for the first time last month, he offered to share US technology used to crack open the gas-rich rock formations. Obama has also offered this to China and others with potential shale gas reserves. Interestingly enough Poland has set out a time line to start producing significant natural gas from their shale deposits within the next decade. Bloomberg points out that this coincides with Germany’s announced timeline to close its 17 nuclear reactors. This is nothing more then coincidence as one would have to truly believe that Germany will close these reactors (HRN Opinion: This is simply a convenient deferral.  Germany’s Chancellor Angela Merkel is simply trying to gain popular support. The public opinion of nuclear power in Germant is likely to change over the next ten years. The person in power in ten years is likely to keep them on a pro-nuclear policy).

Point here is that Poland is committed to shale gas, and moving forward with its development. As well as building an LNG port on the north shore of Poland. This will have significant impact on Europe, and in particular Russian relations with east Europe.

Bloomberg: Poland Targeting Shale Gas With Exxon, Chevron to End Russian Dominance

 

President Obama seeks new energy path but fails to recognize what the path is made of

In his State of the Union address, President Obama outlined his plans for a clean energy strategy to meet environmental goals.

I have often stated here on HRN, that we all can agree on a clean energy future, but the facts are that the road to get there is paved in carbon energy, and natural resources – more specifically rare earth elements.

Wind turbines, solar panels etc. are dependent on rare earth elements that are indispensible in nearly all clean energy products and technologies. Without these rare earth elements, clean technologies are non-existant. To get these elements, takes a huge amount of energy to mine, extract and refine. Heavy diesel equipment, huge energy hungry processing facilities, chemicals etc. its an energy intensive process. Then there is the process to build, manufacture, transport and assemble these cleantech products which also takes a huge amount of energy.

President Obama’s plan is to drop tax credits to oil and gas companies and pass this along to the cleantech sector. Is that really going to acheive anything? No. Those lost tax credits will increase costs that are passed along to consumers – you and me – AND the cleantech companies through increased costs in the energy used to build the cleantech industry. Its stupid.

Istead, we should recognize that to build the “green economy” it takes a lot of current energy from reliable sources. However, there is one source – natural gas – that provides a affordable, lower carbon source of energy and its abundent throughout North America. However, in their wisdom what is really happening with natural gas? Its going to be shipped to Asia where they are smart enough to recognize their energy needs, and smart enought to use natural gas to full extend of its value. Oh, and they are likely to be the biggest manufacturers of wind turbines, solar cells and other cleantech products as well. The US will be twice beaten.

The way things are going it might just play out that the US stays dependent on oil, sells their domestic lower carb natural gas to China, and loses the innovation and manufacturing market for cleantech products to China as well.

Obama got one thing right, China is moving forward and fast. Their graduating millions of students a year in sciences and engineering. They are investing heavily in cleantech and high tech, and securing the energy sources and resources that it takes to build the products in these sectors.

Its getting to the point that the inability of the US politicians on both sides to get something done is determining the outcome of the game before its finished. The race has started, China’s up and runng and the US politicians are still trying to determine where they should put their starting block down. Stop it! Drop the block and get moving.

I know what some are saying… shale gas is environmenttaly damaging. That the hydraulic fracturing process poisons the water basin. The risk of this is low, but the industry listened. The great thing about capitalizm is that it rewards those that provide solutions to problems. If you have a solution to improve something. Your going to do very well for yourself, your family and your shareholders.  Point here is that the answer is not to shut something down when there is a problem and debate about it… the right thing to do is to develop a solution to solve the problem.

Oh, and in the case of hydraulic fracturing… take a look at Gas Frac Energy Services. A Canadian company based in Calgary, Alberta. They have a new fracking process that virtually elliminates the environmental risks that have everyone in New York upset. They took advantage of the situation, provided a solution, and are reaping the rewards.

China and India are really living the “American Dream”. They are living in hope. Hope for their future and recognizing that the problems around them provide opportunity. Opportunity innovate and create solutions to improve their lives. Their getting educated and taking responsibility for their future. They are building new energy sources in wind, solar, nuclear etc to meet their future needs in a green economy. They are shutting down environmentally damaging mines, and factories, and securing resources from around the world. And they are buying lots of natural gas. They are using is in transportation and power generation. Is filling a natural gas powered car inconient in China? No. They built the fill stations and made it convenient. Natural gas is at nearly every petro station in major cities. Meanwhile, as Canada and the US, still debate about natural gas as a via transporation fuel, natural gas producers pipeline companies are building pipelines and facilities to export natural gas to Asia – more specifically China – from Kitimat BC, and Louisiana.

The HornRiverNews has tried to get the message out. The abundance of natural gas in North America is not a problem carbon fuel. Its an opportunity. An opportunity to help in lower carbon emissions on the path to a cleaner energy future.

 

Crystal ball sees stable year in oil, natural gas markets

Peter Tertzakian

Peter Tertzakian, Chief Energy Economist & Managing Director at ARC Financial Corporation, has an interesting article in the Calgary Herald that is worth reading.

For natural gas specifically, Mr. Tertzakian states:

Natural gas continues to be plagued by the threat of oversupply as North American shale gas players continue to drill hard to grab market share from conventional producers at all costs. The infighting is likely to keep prices between $4.00/MMBtu and $5.00/MMBtu through the year, though weather still has the potential to push prices out of those bounds – either side.

The most important comments is:
Crude oil is still an economy-drives-demand-drives-price story, though the lens today is much more focused on the fortunes of emerging markets, especially China, rather than western economies. Natural gas, on the other hand, has much more to do with technology-drives-productivity-drives-cost (down), than the pull of economy and demand. In simplest terms oil remains a price story, but natural gas is now a cost story. That’s the most important thing showing in the crystal ball as we look into Q2, 2010 and beyond.

Good summary. Keep your crystal ball polished.

Calgary Herald: Crystal ball sees stable year in oil, natural gas markets

China CNPC to build 10 natural gas storage facilities

If it was not apparent how important China thinks natural gas is to that countries energy needs, consider that China CNPC, China’s  top oil and gas producer, plans to build 10 gas storage facilities over the next five years.

China’s infrastructure for natural gas storage and distribution is simply not adequate to meet demand fluctuations due to weather, or future demand requirements. (See HRN: China faces intensified gas shortages). China’s natural gas supply fell severely short of demand this winter, causing many problems for the transportation and residential sectors. The National Energy Administration committed to make the necessary investments to avoid future problems, and these 10 facilities are part of that commitment. The 10 storage facilities are intended to avoid future natural gas shortages, holding up to 22.4 billion cubic metres of natural gas which is about 20% of China’s total natural gas demand last year.

And while these storage facilities are a key components to China’s plans to avoid natural gas shortages, it also is an indication of the growing importance China is placing on natural gas in their overall energy mix. China understands how to manage and prepare for future energy demands better then any other country in the world and takes a long term planning approach to everything they do.

Do not be surprised if China joins Korea and starts to make key investments into massive gas reserves locked in shale gas in B.C. A strong connection with the China would make this a natural fit.

Reuters: CNCP to build 10 gas storage facilities