China Hopes that Subsidies will Lead to Shale Gas Boom

In the hunt for cheap, abundant sources of energy to sate its ever growing demands, China is looking to shale gas as its saviour.

China is estimated to have the largest shale gas reserves in the world; however difficulties in the geological location and technological challenges of extraction have prevented it from developing the resource. It has been attempting to grow its shale gas industry since 2009, but as of yet still has no commercial production.

To try and encourage private investors from extracting the shale gas, and with hopes of creating a shale gas boom similar to the one that occurred in the US, China has announced that it will now offer subsidies to any shale gas developers in the country.

The Ministry of Finance announced on Monday that for each cubic metre of shale gas produced the government will pay 0.40 yuan ($0.06).

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As with almost all enterprises that China embarks upon, it has set itself impressively ambitious targets. Although current production is zero, China aims to have a production capacity of 6.5 billion cubic metres (BCM) by 2015, increasing that to 60-100 bcm by 2020.

It will be very interesting to see how Russia take this news. Gazprom has just recently announced that it will spend $38 billion to develop a huge natural gas field in Eastern Siberia, along with a 3,200km pipeline to the East Coast, with the intention of supplying Asia, and by that it means mostly China, with natural gas. If China now develops its own domestic natural gas industry on a large scale then Gazprom’s plans could be ruined.

By. Charles Kennedy of Oilprice.com