Will the Blossom of Unconventional Natural Gas Development in North America Be Repeated in China?

Abstract

Abstract There are substantial volumes of unconventional gas resources in China, including tight gas sands and coal bed methane (CBM). Rapid economic growth in China has increased the demand for more sources of clean energy, such as natural gas from unconventional reservoirs. In the 1980's in North America, the combination of federal tax credits and various technical development programs sponsored by private organizations, public companies and government agencies fostered the development of technology for unconventional natural gas exploration and exploitation. As those technologies in geology, geophysics, drilling, completion, and production have matured, and the price for natural has increased, the development of unconventional natural gas has been blossoming for last decade globally. Without question, it is certain that the development of unconventional natural gas in China will be blossoming in the coming decades. However, there are significant challenges and hurdles to overcome before that happens. This paper first analyzes the conditions and environment required to ensure the development of unconventional natural gas sources, including price, the service industry, cost, and the operational environment. We focus on key technologies in geology, geophysics, and engineering, and how they are tied to the success of unconventional natural gas development. The paper also discusses the advantages China offers, and the challenges in China that must be over come to be sure the blossom of the unconventional natural gas development actually occurs. On the basis of the author's operational experience both in China and North America, we will discuss the impact of different operational environments on unconventional gas development. The paper also discusses: The impact of new technology on unconventional natural gas development; The technologies available and unavailable in China for unconventional natural gas development, and how to use and develop those technologies; and The role of foreign operators in developing unconventional natural gas reservoirs in China. The paper concludes that an open, competitive, and mature service sector is critical to the future blossom, and that proper government regulations and policies in pricing and taxes, and downstream infrastructure will impact the development of unconventional natural gas resources.