October 30, 2013 | Comments Off
The continuing smog incidents in China highlight the social effects of relying heavily on coal-fired power generation (in addition to agricultural field burning practices). You can see the scale of pollution in “Beijing’s air pollution as seen from space”, “China enveloped in smog, as seen from space. Again”, “Smog shuts down Harbin, China, as seen from space”. Yale’s e360 blog comments on China’s efforts to rely more on natural gas and less on coal:
Chinese officials have said that to reduce air pollution the most densely populated parts of Beijing should use only gas heat, which limits the supply of natural gas for smaller cities and forces those cities to rely on coal. Pollution levels in Chinese cities commonly exceed World Health Organization guidelines by 40 to 50 times. The problem is most pronounced in northern China, where air pollution from burning coal has already shortened life expectancy by 5.5 years compared to the southern part of the country. China’s natural gas shortage is expected to be 10 percent higher this year than last year, since more users have switched from coal. Authorities are rationing natural gas and prioritizing its use for homes and transportation, but experts don’t expect the shortage to subside anytime soon.
It’s important to not only think of China as an energy consumption behemoth, but also an energy production behemoth. There will undoubtedly be global impacts on energy markets and climate change when China is able to economically tap its vast natural gas reserves. According to the U.S. EIA, China is the largest holder of shale resources of 41 countries assessed for potential recoverability.
As e360 notes above, natural gas shortages have resulted in increased coal use. However, there is some promising news about Chinese shale production. In a story for Reuters yesterday (“Sinopec could reignite China shale hopes”), the state-owned Sinopec has started pumping gas in commercial volumes for the first time. But there is a long way to go. Currently, the entire process takes ten weeks (!), as compared to several weeks in the United States:
With limited participation from established global service companies such as Baker Hughes (BHI.N) and Schlumberger (SLB.N), Sinopec’s Jianghan team has improved in key areas such as fracturing and logging – the process of making detailed records of geological formations.
At one well, Sinopec Jianghan executed a 22-stage fracturing process at a depth of 1,500-metre – a challenging task for a company with limited experience of such a complex procedure.
Key for commercial production is whether companies can locate high-yielding shale formations and then drive down costs. Sinopec’s Jianghan unit aims to halve drilling costs from a hefty 80-100 million yuan per well ($13-16.6 million) currently, said the official and the Xinhua report.
Shortening each well’s drilling period from the current average of 70-75 days by drilling a few wells at the same time is one of the most effective ways of achieving this due to economies of scale, said industry officials. Cost savings will also come from multi-directional horizontal drilling and recycling fracking fluids, officials said.
There are a lot of unknowns about Chinese shale. Will the economics work out? Will drilling time come down? How will China deal with fracking fluids and the water-intensity of fracking? But it seems like a matter of when, not if, China taps into its shale reserves.