China's relationship with new natural gas extraction methods has seen its ups and downs over the past few years. Expected technological breakthroughs have been slow to materialize. Nonetheless, the country's largest oil producer announced breakthroughs in its Yunnan gas block, perhaps ushering in a new phase in China's stalled shale gas sector.
Company spokesman Liang Xing (梁兴) announced PetroChina engineers have completed six drilling platforms in northeast Yunnan. He was speaking at the fifth annual Asia Shale Gas Summit, which concluded last week in Chengdu. The conference ended as organizers prepare for a November international industry trade fair, entitled 'Moving China's Southwest Shale Gas Development into the Big Time'.
During his remarks, Liang revealed 26 newly drilled wells in Zhaotong Prefecture have proved more successful than expected. Using horizontal drilling techniques, the wells are now fully operational and together have the capacity to extract 550 million cubic meters of shale gas annually.
Such production is a significant jump for the hydraulic fracturing industry in southwest China. Once viewed as an energy goldmine by Beijing, tapping shale gas deposits in Sichuan and Yunnan has proved particularly tricky. Initial extraction targets set three years ago were cut by more than half in 2014, largely due to cost overruns. Addressing the lingering status of these fears, Liang admitted in his comments, "if domestic natural gas prices continue to fall, there will be problems with cost effectiveness".
Of additional concern is the scientific question of how much the hydraulic fracturing process — also called fracking — contributes to increased seismic activity near drilling sites. Typically, establishing a well involves the construction of a derrick from which pressurized water, sand and a potent cocktail of 'fracking fluids' are injected into the earth. The goal is to break apart the bedrock below, thus releasing natural gas trapped underground.
Almost half of China's estimated 50 trillion cubic meters of shale gas reserves lie beneath the administrative regions comprising earthquake-prone southwestern China. Yunnan's Zhaotong Prefecture, where PetroChina's wells were drilled, experienced a devastating 6.5 magnitude earthquake only 15 months ago.
Industry representatives in China label the Yunnan wells experimental, calling the area near Sichuan's Changning County (长宁县) a "national demonstration zone". Creating stable and productive horizontal wells is a priority, they say, while looking to the upcoming industry trade fair in Chengdu. It is expected companies such as Halliburton and Royal Dutch Shell will attend, offering the latest in hydraulic fracturing technology.
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