China’s annual shale gas production surges by more than five times

Shale-gas production in China, holding the world’s biggest shale reserves, surged by more than five times last year to 200 million cubic meters, according to the Land and Resources Ministry.

PetroChina Co.’s Changning-Weiyuan and Fushun-Yongchuan areas, along with the Fuling block operated by China Petrochemical Corp., known as Sinopec Group, have built new production capacity of 600 million cubic meters, the ministry said in a statement on its website on Wednesday.

Output was about 30 million cubic meters in 2012, according to Bao Shujing, a director at the ministry’s geological research bureau.

China’s government has pledged to spur the shale industry’s development and meet rising gas demand by prioritizing land approvals, allowing tax-free imports of equipment and offering subsidies to explorers. The country is pumping more than 2 million cubic meters a day of shale gas, the National Energy Administration said.

Sinopec plans to produce 3.2 billion cubic meters from Fuling in 2015, doubling its previous target, it said.

Oil and natural gas output hit record highs last year, according to the ministry. Production of crude rose 1.8% to 210 million metric tons while conventional gas increased 9.8% to 117.7 billion cubic meters.

PetroChina and Sinopec’s output may determine if China will reach its 2015 shale-gas production target of 6.5 billion cubic meters, said Gordon Kwan, the regional head of oil and gas research at Nomura Holdings in Hong Kong.

“Long term, we believe the government must raise domestic selling prices for natural gas and increase shale-gas subsidies further to motivate producers,” he said.

That target may be hard to reach as development has been slow, Zhang Yousheng, a researcher with the National Development and Reform Commission, said on Oct. 16.