Sinopec to tap into shale gas market and rescue China from growing gas shortfall

Sinopec Group, China’s second biggest oil and gas producer, announced it has launched its first shale gas project, expecting to produce 300 to 500 million cubic metres a year by the end of 2012, said the conglomerate on Tuesday.

China’s conventional gas production is stretched to the limit, revealed a study by international consultant Pricewaterhouse Coopers (PwC), published on Monday. However, project such as the one announced by Sinopec and massive reserves of shale gas and coal-bed methane might ease the shortfall.

The report predicts China’s gas shortfall will grow nine-fold by 2015. “The industry would then need to overcome major pricing, regulatory, distribution and water challenges, says PwC.

Aware of the situation, Beijing has announced that it will step up the development of unconventional resources such as shale gas, coalbed gas and oil sands, said the five-year plan released by the National Energy Administration (NDRC).

China’s annual natural gas consumption will add up to 260 billion cubic metres by the end of 2015, representing 7% to 8% of total energy consumption, said the organism.

The nation’s natural gas consumption expanded 20.6% to 129 billion cubic meters last year, or 4% of total energy consumption, the plan shows.

By the end of 2015, China will have to produce 170 billion cubic meters of natural gas and import 90 billion cubic meters per year to meet domestic demand.

NDRC said China would also press ahead with the shift from government-set prices to a system based on international fluctuations in a move to better regulate the industry.