22 April 2012

China Begins to Face a New Wealth of Energy

According to estimates from the US Energy Information Administration, China leads the world, with about 36 trillion cubic meters of recoverable shale gas reserves in several basins on land and under the South China Sea. The reserves are believed to be able to meet China's demands for more than 300 years at the current rate of consumption. _China Daily _ via _ GWPF
Chinese demand for energy and other commodities has boosted world commodities markets to somewhat inflated levels. As the Chinese economies moves away from its "bubble-growth" scheme to a more balanced economy, and learns to develop its native resources more efficiently, wisely, and in a less corrupt manner, Chinese demand on global commodities markets should begin to ease at least a bit.
Just as shale gas production in the US has reduced its dependence on imports, China hopes that shale gas will play a leading role in the country making the most of its energy mix and curtailing its reliance on foreign imports. To that end, the government has made great efforts to lure more companies into finding and developing this unconventional energy source.

First, it reformed the pricing mechanism in two pilot provinces and let the market decide wholesale prices for unconventional gas, including shale gas. This has created a new incentive for companies to produce shale gas.

Second, China has unveiled some supportive measures for shale gas development. The National Energy Administration established a shale gas laboratory in Langfang, Hebei province, where the national shale gas research center is located.

It also promised to increase investments and set up shale gas special funds to support shale gas discovery and evaluation, as well as relevant technologies on shale gas exploration and development.

In addition, the government is encouraging companies to increase investment in technological research and development by exempting shale gas resource taxes and granting financial subsidies.

Third, in December last year the government approved shale gas to be an independent mining resource, paving the way for Chinese private companies' entry into the sector, which previously was restricted only to State-owned enterprises. _China Daily
If China truly has the world's largest reserves of shale gas, and if China can develop its resources free from the corrupt dead-weight of state owned enterprises and regional government moochers, it may begin to learn the valuable secrets of shale gas production which North American producers spent many decades developing and learning.

If Chinese producers can operate relatively free of the rampant corruption that burdens many other aspects of the Chinese economy, they may be able to help under-gird an important new Chinese energy industry -- unconventional liquid fuels production. Such an industry might begin with gas to liquids (GTL) and coal to liquids (CTL). But from there it is likely to develop biomass to liquids (BTL) and other "XTL" industries, including gas hydrates to liquids.

Such alternative liquid fuels production would progressively aid China in reducing its expensive oil imports, and would also place a downward force on world oil prices -- in the wake of increased supplies. It is likely that OPEC and Russia would reduce production in response to any meaningful growth in XTL production of liquids on the part of China, North America, and other regions rich in unconventional hydrocarbons.

But the very fact of significant XTL production in the face of ample spare production capacity on the part of the world's big oil exporters, should have a somewhat dampening effect on the somewhat over-enthusiastic global oil marketplace.

China may be developing its new oil & gas resources just in the nick of time: Japanese researchers suspect that the globe may be on the brink of a period of significant global cooling h/t GWPF


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