Archive for 3.8 Gas

Will There Be a Shale Gas Revolution in China by 2020?

This paper, by Fan Gao, assesses the extent to which China is likely to achieve levels of shale gas production by 2020 which would make a meaningful difference to its growing need for imports of pipeline gas and LNG. The study suggests that given the rather disappointing progress on Coal Bed Methane production since exploration and development work started some 25 years ago, a cautionary approach is needed in anticipating the outlook for shale gas for the remainder of this decade.  The specific challenges include water availability and population density demographics as well as the need to stimulate an innovative competitive dynamic in the Chinese upstream service sector and an appropriate upstream investment framework with foreign participants for the transfer and application of technology. The paper provides a rare appreciation of the dynamics of the onshore Chinese upstream industry and from that basis a better understanding of what will be required, on a number of policy levels, for Chinese shale gas development to succeed.

3.8 Gas

Testimony: China’s Prospects for Shale Gas and Implications for the U.S.

In this testimony, Senior Associate Sarah Forbes describes the state of China’s shale gas industry; governmental policies that will drive its future development in China; the implications of U.S.-China business-to-business partnerships and government-to-government cooperation; and how shale gas development in China and the United States changes the global dynamics of energy security.

3 Oil & Gas, 3.8 Gas

The Pricing Debate Over Russian Gas Exports to China

The Oxford Institute for Energy Studies has recently published a paper which concludes that agreement between Russia and China for pipeline gas exports may not be reached this year or even in 2012. The paper by James Henderson suggests that the Chinese have developed other gas import options from Central Asia, Myanmar and a range of LNG suppliers which mean they are not in a hurry to conclude a contract with Russia. On the other side of the border Gazprom does not want to compromise on the principle of oil-linked pricing on which it is insisting in its European export contracts. Both sides believe themselves to be in a powerful position without the need for compromise, but the paper suggests that if the first pipeline project could be located in Eastern Siberia – instead of the Altai line from Western Siberia which is Gazprom’s priority – then it would be easier to agree a price acceptable to both parties.

3 Oil & Gas, 3.8 Gas

Policy Study: Gas-fired Power Generation in China (Synthesis Report)

Developing a natural gas market will enable China to meet its growing energy needs without relying exclusively on coal and oil. The first step in developing a natural gas market is to develop a natural gas-fired power generation market; right now, however, the relatively high price of natural gas and the way in which power generators are required to purchase natural gas are barriers to the large-scale development of natural gas-fired power generation in China. This report details these barriers to natural gas-fired power generation and recommends an overall national energy development strategy, along with specific policies, that can help overcome them.

3 Oil & Gas, 3.8 Gas

Pricing and Demand for LNG in China: Consistency Between LNG and Pipeline Gas in a Fast Growing Market

There are numerous LNG terminal projects both planned and proposed in the coastal regions of China where the economy has been rapidly expanding. While the Chinese government has adopted a policy of siting one such project in each coastal province, a simple calculation indicates that, with construction of only about eight LNG-receiving terminals1, each with a capacity of about 3 million tons per year, this policy would give China a total of around 24 million tons in terminal capacity. Assuming that each of these projects proceeds to the second phase and is consequently expanded to around 6 million tons, the combined import capacity would be close to 50 million tons. Such a dramatic rise in LNG imports by a single country would have substantial impacts on the international LNG market.

3 Oil & Gas, 3.8 Gas

The Future of Natural Gas Consumption in Beijing, Guangdong and Shanghai: An Assessment Utilizing MARKAL (2008)

Natural gas could possibly become a significant portion of the future fuel mix in China. However, there is still great uncertainty surrounding the size of this potential market and therefore its impact on the global gas trade. In order to identify some of the important factors that might drive natural gas consumption in key demand areas in China, we focus on three regions: Beijing, Guangdong, and Shanghai. Using the economic optimization model MARKAL, we initially assume that the drivers are government mandates of emissions standards, reform of the Chinese financial structure, the price and available supply of natural gas, and the rate of penetration of advanced power generating and end-use. The results from the model show that the level of natural gas consumption is most sensitive to policy scenarios, which strictly limit SO2 emissions from power plants. The model also revealed that the low cost of capital for power plants in China boosts the economic viability of capital-intensive coal-fired plants. This suggests that reform within the financial sector could be a lever for encouraging increased natural gas use.

3 Oil & Gas, 3.8 Gas

The Future of Natural Gas vs. Coal Consumption in Beijing, Guangdong and Shanghai: An Assessment Utilizing MARKAL (2007)

PESD has been studying the emerging global market for natural gas through a series of closely integrated research projects. The topics of these studies range from focusing on the geopolitical implications of a shift to a global gas market, the factors that affect gas pricing and flows as LNG links the U.S. and European markets across the Atlantic basin, and how gas projects fare in privately-owned independent power projects (IPPs) in emerging markets.  One of the open questions in all these studies concerned China–the country uses relatively small amounts of gas now but could use much more in the future. The role of natural gas in the Chinese economy is of critical import both domestically and for global energy and environmental issues. The competition between coal and natural gas in this market has tremendous implications for local air pollution and for climate change. Rising demand for imported gas in China will also shape the LNG market in the Pacific Basin and could lead to the construction of major international pipeline projects to monetize gas supplies in Russia and the Middle East. The present paper is one in a series that looks at the Chinese market in detail.

3 Oil & Gas, 3.8 Gas