China boosts shale gas development

China stepped up shale gas development last year, as the country looks to fall back on unconventional output to drive natural gas production growth.

Newly proved gas reserves fell by 2.7pc to 809bn m³ in 2019 from a year earlier after a larger increase the previous year.

Last year's reserve additions were mostly located in the Ordos and Sichuan basins in north and southwest China, the country's natural resources ministry (MNR) said.

Newly proved gas reserves rose by nearly 50pc to 831bn m³ in 2018 from 2017 levels.

But of 2019's incremental proved gas reserves, shale gas made up over 90pc of the total, rising more than fivefold to 764bn m³. This included PetroChina's Changning-Weiyuan and Taiyang as well as fellow state-controlled firm Sinopec's Yongchuan shale gas projects, all located in Sichuan.

China added 41pc more shale gas output, reaching 15.4bn m³ last year, the MNR said.

PetroChina, the biggest beneficiary of subsidies given to unconventional gas development, may add up to 4bn m³ of shale gas output this year to reach 12bn m³. Sinopec produced 6.3bn m³ last year, mainly from its Fuling project in Chongqing and analysts forecast output to reach 7.5bn m³ this year.

Development of coal-bed methane (CBM) had more disappointing results, according to the MNR. Newly proved reserves for CBM were down by 56pc to 6.4bn m³.

Beijing revised its subsidy scheme for unconventional gas last year to aid development of the sector.

The government last revised subsidies in 2015, when it decided to cut shale gas subsidies to 300 yuan/'000m³ ($43.80/'000m³) from 2016-18 and Yn200/'000m³ in 2019-20 compared with Yn400/'000m³ in 2012-15. The CBM subsidy was increased in 2016 to Yn300/'000m³ from 2016-20 from Yn200/'000m³ previously.

By Karen Teo