A Comparative Analysis between Coal-Bed Methane and Shale Gas in China Based on Cases

Abstract

Owing to the growing gap of natural gas between supply and demand in China, the unconventional natural gas, including coal-bed methane (CBM) and shale gas, has been considered as strategic energy sources. An assessment by China’s Ministry of Land and Resources (MLR) announced that China has potentially resources of 36.7 trillion cubic meters of CBM and 25 trillion cubic meters of shale gas, larger than those of the U.S. Controversial views about their commercial prospects and priorities in order are available. This research aims at exploring which is more economically viable and worth the priority. A cost-benefit analysis (CBA) based on average single well data is employed to carry out a comparative analysis between two typical fields, the coal-bed methane (CBM) fields in the Qinshui basin and the shale gas fields in Sichuan basin. The net present value (NPV), the internal rate of return (IRR) and the payback period are used as indicators in this analysis. The results indicate that CBM is superior to shale gas in viability under the current technological and economic conditions, and the future of the CBM industry is clearer than that of the shale gas industry, but the latter is still promising if the drilling costs can be reduced significantly with technical progress. We suggest that the CBM industry should be given the priority to, and the policy for shale gas should focus on promoting technical innovations.