Birth of the 172nd Independent Mine Variety in China

Birth of the 172nd Independent Mine Variety in China -- Story of Shale Gas Rising onto the Historical Stage
Source: Portal Website of the Ministry of Land and Resources Citation: China Land and Resources News Date: March 31, 2012

Shale gas, regarded as a substitute for conventional natural gas, was officially verified as the 172nd independent mine variety in China at the end of last year; at the 5th session of the 11th National People’s Congress, in the Report on the Work of the Government, Premier Wen Jiabao stated clearly to “tackle key problems more quickly in the exploration and development of shale gas”; shortly after that, China’s Shale Gas Development Program (2011-2015) was issued. These facts have made the exploration and development of shale gas a headline in media. Rise of shale gas onto the historical stage has derived from arduous efforts and unselfish commitment of relevant authorities in land and resources. To accelerate the progress in the exploration and development of shale gas in China, these authorities have made painstaking efforts in recent years so that they are the real hero to launch this “energy revolution”. The development and exploitation of shale gas in large scales is still a long way to go as it is facing difficulties such as the lack of core technology, which cannot be overcome in a short period. Recently, Peng Qiming has been so busy that reporters’ interviews with him have to be done on phone. As the head of the Department of Geological Perambulation of the Ministry of Land and Resources, he has been preoccupied with a kind of non-conventional oil & gas resources just verified as an independent mine variety. “If everything goes right, the development of this new energy source will be commercialized in a few years, changing the energy structure in China and providing unexhausted power for the sustainable economic and social development in China.” Such kind of magical resources is known as shale gas At the end of last year, the application of the Ministry of Land and Resources for the verification of shale gas as an independent mine variety was officially approved by the State Council, meaning it became the 172nd independent mine variety in China. Ever since then, this newborn of mineral resources has become a favorite, drawing a lot of attention from all relevant sides in China. At the 5th session of the 11th National People’s Congress, it was so rare that shale gas was included in the Report on the Work of the Government, which stated that “to tackle key problems more quickly in the exploration and development of shale gas”. Immediately after the close of this session, China’s first shale gas development program was promulgated. Its output is expected to reach 60-100 billion m3 in 2020, almost equal to the current output of conventional natural gas. According to the prediction of Strategic Research Center for Oil and Gas of the Ministry of Land and Resources, its output is expected to be as much as conventional natural gas, approaching that of the US. An “energy revolution” triggered by shale gas has been already irresistible. Major Energy Source in Future Shale gas is a kind of nonconventional natural gas in the adsorptive and free states, which is trapped within shale formations and their interlayer rich in organic mud. It largely comprises methane and is characterized with authigene and self-deposit, widespread distribution, shallow burial and a long production cycle. As a clean and efficient energy source, shale gas has suddenly risen to be a sensation in the global oil and gas exploration, and its exploration and development has become a common choice for major countries and regions with abundant shale gas resources.  “Shale gas will become a major energy source in future and change the world energy landscape.” said Peng Qiming. According to the latest statistics of the U.S. Energy Information Administration, the recoverable reserves of shale gas amount to 189 trillion m3, consisting of 55 trillion m3 in North America, 51 trillion m3 in Asia, 30 trillion m3 in Africa and 18 trillion m3 in Europe. These days, the exploration and development of shale gas has been booming in North America, Asia, Europe, South America and Oceania, initiating an “energy revolution”. Take the US for example, which has been the first one and most successful one in shale gas development. Shale gas revolution in the US has undermined the structure of the global LNG market and its impact will get more prominent so as to change the world energy landscape. Thanks to breakthroughs in development techniques of nonconventional natural gas, especially shale gas, US replaced Russia for the first time with a shale gas output of 624 billion m3 to become the largest producer of natural gas in the world, reversing its long-lasting dependence on imports in terms of natural gas consumption. Experts even believe that the shale gas reserves in the US will relieve its concern over energy supply in the next 100 years For China, shale gas is also an energy source of strategic importance. China is both a large energy producer and a large energy consumer. But the energy structure is not rational enough. In 2011, the dependence of China on imported natural gas was as high as 24.3%. “Clean natural gas energy has a proportion as low as 4% in primary energy consumption in our country, some 20 percentages lower than the world average.” said Zhang Dawei, deputy director of the Strategic Research Centre for Oil and Gas, Ministry of Land and Resources. From the information released at the 5th session of the 11th National People’s Congress and the 5th session of the 11th CPPCC National Committee, to reduce carbon emissions and to grow in a low-carbon manner, China is speeding up the adjustment to its energy structure. In the Report on the Work of the Government, Premier Wen Jiabao stressed to improve the energy structure and promote the use of conventional energy sources in a clear and efficient fashion. The reporter has learnt that the composition of Chinese energy consumption will be adjusted to raise the proportion of natural gas to 8%-12% in primary energy consumption during the “Twelfth Five-Year”. In the long run, Chinese social and economic development will lead to strong demand for energy sources, especially those clean energy sources. As a kind of clean and efficient fossil energy sources, shale gas has the potential to become a major pillar sustaining the low-carbon economy.  “It is an issue of strategic importance and concerning the overall situation in building a moderately prosperous society in all respects to facilitate the exploration and development of shale gas in order to realize the leap-frog development of the shale gas industry and to increase the supply capacity of gas energy sources.” said Peng Qiming. The State Council has also put a high value on the exploration and development of shale gas as it has not only put shale gas onto the list of independent mine varieties, but also has required relevant government departments “to formulate a program for the development of shale gas as soon as possible by careful survey of such resources in the first place and to study techniques and methods for its exploitation,” “to strengthen research on its formation mechanism, enrichment conditions and key target regions and to tackle technical problems.” These facts all point out the determination of the Chinese government in the development of shale gas resources. Research already in Process China has a robust resources basis for the development of shale gas resources.
 
Shale gas resources in China are characterized by a lot of types, widespread distribution and great potential. Marine facies sediments extend for 3 million km2, marine-terrigenous alternated facies sediments more than 2 million km2 and terrigenous-marine facies sediments about 2.8 million km2. All these sedimentary regions have the geological condition of shale formations with abundant organic matters of various kinds. Shale layers have been sufficiently developed in all phases of geological history so that a series of shale formations with rich organic matters have taken shape in marine, marine-terrigenous alternated and continental facies. Indeed, China is among those countries which have conducted research on shale gas earlier. As early as 2004, it set about tracking the progress of international research on shale gas. Since then, the authorities in land and resources have worked with relevant universities and research institutions to do a lot of preliminary research, which has laid a good foundation for “the leapfrog development of the shale gas.” The reporter learnt from the Strategic Research Center for Oil and Gas, Ministry of Land and Resources, based on years of research, the Ministry of Land and Resources proposed to take the Yangtze Plate as the prospective area in China with shale gas enrichment in 2008, launched the program of screening the potential of shale gas resources in key regions in China and favorable zones in 2009, and set up a pioneering pilot zone for strategic survey of shale gas resources in Sichuan, Chongqing, Guizhou and Hubei in 2010. At the meantime, the ministry organized some experts to conduct preliminary survey and research on shale gas resources in Jiangsu, Zhejiang, Anhui and some northern regions, getting a rough picture of the distribution of shale in some favorable zones in China, identifying major series of strata and developing preliminary methodologies on the evaluation of the potential of shale gas resources and standard framework for screening favorable zones, and screening a number of prospective areas with shale gas enrichment. Such efforts have laid a solid foundation for nationwide survey and evaluation of the potential of shale gas resources and screening of favorable zones. Meanwhile, some research institutions and universities have also engaged in this mission. As the first Chinese university to offer courses and conduct research on shale gas, China University of Geosciences in Beijing has undertaken the national special research programs in zoning survey and evaluation of the national oil & gas resources strategy and completed a number of research programs related to shale gas, in which innovative research results have been made. Wang Hongbing, Secretary of the CPC committee at the university, said, “Our university has built and maintained good exchange and cooperation with the Strategic Research Center for Oil and Gas, Ministry of Land and Resources (the Center) to jointly complete a lot of exploratory and pioneering research on shale gas and make good leading experiments. The Center engages in research of strategic policies, planning and overall arrangement, zoning survey and evaluation of oil and gas resources as well as infrastructure and support for management, supervision, conservation and proper use of oil and gas resources. In recent years, devoting to research on the exploration and development of shale gas, it has organized experts to tackle underlying and strategic issues in the exploration and development and conducted pioneering survey and research as well as demonstration and promotion programs. According to Zhang Dawei, in 2011, in the program for zoning of the national oil & gas resources strategy, the Ministry of Land and Resources set a sub-program, “national survey and evaluation on the potential of shale gas resources and favorable zones”, in which it divided the national land territory into upper Yangtze & Yunnan-Guizhou-Guangxi region, middle-and-lower Yangtze & Southeast region, North China & Northeast region, Northwest region and Qinghai-Tibet region, organized 420-strong technicians in 27 organizations to carry out a systematic evaluation on the potential of shale gas resources. “And eventually get a clear picture of Chinese shale gas resources on our own.” The result of the evaluation indicated that shale gas in China is characterized by intricate geological conditions, a range of resources varieties and relatively concentrated distribution. The potential of its recoverable reserves is 25 trillion m3 (not including that in the Qinghai-Tibet region), around the same level of that of conventional natural gas on the continent and approaching the shale gas reserves of 24 trillion m3 in the US. The program screened out 180 favorable zones with a total area of 1.11 million km2. Significant Breakthrough to the Exploration and Development Indeed, the Chinese central government has always been paying much attention to the development of the shale gas. On August 17, 2009, Li Keqiang, Member of the Standing Committee of the Political Bureau of the CPC Central Committee and Vice Premier of the State Council, delivered an important speech on strengthening the geological survey and exploiting of China-based resources. On the same day, the Strategic Research Center for Oil and Gas, Ministry of Land and Resources, teaming up with China University of Geosciences in Beijing, initiated the first prospecting program in China on shale gas in Qijiang and Wuxi counties, Chongqing, marking the official launch of the exploration and development of shale gas resources in China On November 15, 2009, during the first visit of the US President Obama, China and US governments signed the Memorandum of Cooperation on Shale Gas between the U.S. Department of State and China`s National Energy Administration. Ever since then, China and the US have carried out inter-governmental exchanges for many times, promoting the survey and prospecting of shale gas in China. A lot of government bodies and other organizations have actively committed to the development and research of shale gas resources, including relevant state ministries and commissions including the Ministry of Land and Resources, local governments at different levels, related oil companies and even non-oil-gas ones, prospecting institutions, universities and research institutions.   "As a result, although China has a large gap with US in the exploration and development of shale gas as we started later, we have had a good start and a positive development trend because the state has paid a lot of attention to it and the Ministry of Land and Resource has taken effective measures."said Peng Qiming. Based on effective work, China’s exploration and development of shale gas has made substantial progress. According to Zhang Dawei, until now, China has finished the drilling of some 30 shale gas exploratory wells, in which fracturing in 18 wells have brought out commercial gas. It means that China has roughly mastered the fracturing technique for shale gas and these wells will have a good prospect. Chinese companies have carried out cooperative development and research with foreign companies such as Shell and Exxon Mobil. Relevant Chinese companies and research institutions and universities have formed special departments to start research on shale gas’ formation mechanism, enrichment regularity and conditions for deposit and conservation, while oil companies are attempting techniques for shale gas horizontal well drilling and completion and multi-interval fracturing. Moreover, management over shale gas resources in China has also started. In view of shale gas being a new energy source, the Ministry of Land and Resources has strengthened the management over the exploration and development of shale gas by formulating a work plan on the management over shale gas resources, in which the approach, work principles, main contents and focuses of the management over shale gas resources have been further clarified. Based on the survey, evaluation and research on shale gas resources in recent years, the ministry conducted the appraisal and application of shale gas for being listed as an independent mine variety through the comparisons between shale gas and natural gas and CBM. And with the approval of the State Council, shale gas has been managed as a new mine variety. Meanwhile, it has also held bidding events for the assigning of the exploration rights of shale gas, aiming to reform the shale gas resources management system by introducing the market-oriented mechanism. "In 2011, we successfully conducted the bidding events for the assigning of exploration rights of shale gas, completing the first market-oriented attempt in oil and gas mining rights and taking an important step toward the market-driven reform to oil and gas mining rights. This year, we will continue this work."said Peng Qiming. Opportunities and Challenges While we have made great achievements in such a short period, Chinese exploration and development of shale gas has been just in its initial phase for the moment and thus commercialized development and utilization of shale gas still has a long way to go According to Peng Qiming, Chinese exploration and development of shale gas have the following opportunities for now and in the future: First is the state policy support. As the Chinese economy is growing steadily, its macro economy is positive, which has aroused the confidence underlying the development of shale gas in China. Second, great potential in shale gas resources in China has laid a good resources basis for the exploration and development of shale gas. Third, foreign techniques for the exploration and development of shale gas have largely taken shape and China has also built up techniques in this aspect, both of which the development of shale gas in China can draw upon. Fourth, strong demand for gas energy sources has established a good environment for the development of shale gas and such strong demand can act as internal power driving its development. At the meantime, Chinese exploration and development of shale gas also confronts great challenges: First, the shale gas resources basis in China needs further clarification, which is a difficult task; second, key techniques for the development of shale gas require more intense research; third, the diversified shale gas investment mechanism is yet to be established and the market access should be accelerated. Zhang Dawei, committed to shale gas research for a long time, thinks many problems exist in the current exploration and development of shale gas in China, such as incomplete market access, lack of policy support and core technology, inadequate survey and under-furnished official site. Nonetheless, he also believes, in view of Chinese advantages for the acceleration of the development of shale gas, the course of the development and utilization of shale gas in China can be shortened significantly to realize the leapfrog development and the goals specified in the Shale Gas Development Program (2011-2015), if proper measures are taken. (By Li Xiang)