ÌýThanks to the extraction method of horizontal drilling and hydraulic fracturing, total shale gas production in the U.S. has multiplied. With a rapid expansion of unconventional resources, in particular shale oil and tight gas, both tremendous enthusiasm and big skepticism has been created. Some have proclaimed that shale boom will be a game changer in the resource and energy markets while others are questioning whether the shale boom is temporary hype rather than a permanent and solid reality.
By creating systematic conditions for shale investment, the shale boom is likely to transcend the U.S. borders since its economic, geopolitical benefits are too significant to ignore. Once the major environmental concerns are met, it is more than likely that the shale revolution will have an effect on a global level by reshaping the global energy market, by increasing energy security and contributing to the affordability of energy resources in the long run.
While the U.S. has benefited from number of factors such as geology, existing supply chain infrastructure as well as skilled personnel, this does not necessarily mean that other countries rich in shale deposits cannot replicate the success of the U.S. shale development.
By comparison with the U.S.’s shale development, China’s experience with unconventional gas and oil exploration can be given as a sobering example of how above-below ground factors such as infrastructure, technology, skilled personnel, supply chain as well as geologic issues can cause many challenges during the production.Ìý
China has an ambitious production target of 60-100 bcm for 2020 and began experimenting in shale exploration and drilling since 2014.Ìý The China Petroleum & Chemical Cooperation’s (Sinopec) shale production reached 2.6 billion cubic meters (bcm) at the Sichuan Basin as of 2014 and has completed 322 shale gas wells.Ìý
However, China is still at the stage of infancy in shale gas and oil production and the country has faced many difficulties with both above and below ground issues. Major impediments such as the country’s infrastructure, cost of production and the ownership of the energy resources are currently limiting ÌýChina’s ability to make the most of its shale resources, and the country has a long way to go if it is to catch up with the US advanced level shale production.
First of all, China does not have sufficient infrastructure such as pipelines and other supporting facilities to support the drilling companies. As IHS’s Kevin Liu points out “China’s major natural gas basins are located in the west, far from the coastal areas with greatest demand for natural gas.� Obviously, gas basins being located at far distances from demand requires the building of pipelines and other facilities to allow produced gas and oil flow smoothly to the place where it is needed. Not only the cost of infrastructure but also lack of experienced personnel increases costs because the time spent on fracturing shale wells has been taking much longer than it should.
Moreover, in China there are only four state companies that have access to work in conventional gas and oil fields. These companies are a major obstacle for those private companies that want to get involved in shale drilling operations.Ìý State control of these assets will impede innovation in the energy market.
Given these challenges, replicating the speed of the U.S. shale boom is unlikely to take place in the short-run.Ìý However, if China takes steps to invest in the necessary infrastructure and training while at the same time considers opening up parts of its energy market to private ownership then many of the challenges it is currently facing can be overcome and a successful shale industry can be created in the long-run.
The shale revolution will no doubt continue to alter the way that conventional resources are produced and show how innovation in technology can reshape the global energy outlook. Major energy authorities are expecting that shale boom will take place sooner or later although major obstacle will take some time to be solved in countries where shale reserves are abundant.
� There is a bit of a delay in shale development outside North America� says Kent Moors, Global Energy Strategist. “But it is only a matter of time now. The shale oil craze is going global and it cannot be stopped�. Overall, shale boom is likely to remain in decades to come and continue to change the global outlook by shifting the global energy production.