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Shell ‘hits shale gas’ in China

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Anglo-Dutch supermajor Shell has found shale gas in China, marking the country’s first discovery of the resource that has transformed the US energy landscape, according to a report.

News wires  06 December 2011 11:29 GMT

An official with Shell’s partner PetroChina, a unit of state-owned China National Petroleum Corporation, said drilling results from two wells drilled by Shell had been positive.

“Shell has two vertical wells and they got very good primary production,” Professor Yuzhang Liu, vice president of PetroChina’s Research Institute of Petroleum Exploration and Development, told Reuters on the sidelines of the World Petroleum Congress (WPC) in Doha.

“It’s good news for shale gas,” said Liu, who regularly represents PetroChina at industry events around the world.

China currently has no commercial shale gas production and the inaugural find could cap imports in a market that natural gas producers are hoping will drive demand.

Some industry executives doubt the explosion of shale gas in the US could be replicated elsewhere due to difficult geology, the lack of water availability or land access issues.

Liu accepted the rock formations in China were “different” from those in the US but denied this meant they were more challenging or less bountiful.

In less than decade, shale gas has transformed the US from gas shortage to a point where companies are planning to export liquefied natural gas, fundamentally altering the dynamics of the international gas market.

Many gas producers who were targeting the US for supplies were forced to rethink their plans and China, with its booming energy demand, was seen as the answer to their need for a new market.

A Chinese “shale gale”, as the revolution was termed in the US, could jeopardise that market too.

Shell declined to confirm the find but said in a statement:”Shell will complete drilling activities by the year end… as planned.”

Chief executive Peter Voser has previously said he has “great expectations” for Chinese shale but was cautious in his comments to the WPC on Tuesday.

“We are going through the exploration phase there and are exactly now analysing what potential is available now in China,” he told a news conference.

In 2009, PetroChina and Shell agreed jointly to evaluate shale gas reserves of the Fushun-Yongchuan block in the Sichuan basin.

Earlier this year, industry sources said Shell had started drilling two shale gas exploration wells in Fushun.

A US Energy Information Administration report in April said China had 1275 trillion cubic feet of technically recoverable shale gas resources – by far the largest in the world – followed by the US with 862 Tcf and Argentina with 774 Tcf.

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Gas is ‘a Threat, Not a Bridge’ to Renewables

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Natural gas, once seen as a useful bridge between the eras of coal and renewables, poses one of the biggest threats to the wind-energy business, if not the whole future clean-tech revolution, according to experts.

“We’ve talked over the last decade of gas as a bridging technology, but we’re now seeing what I would call the threat of gas,” James Leape, director-general of WWF International, told the European Future Energy Forum in Geneva, Switzerland.

“Maybe gas does have a role as a bridging fuel. But now you have people like the chief executive of Shell [Peter Voser] talking about gas as a destination fuel.

“Frankly, if we build the future economy on shale gas, we will have lost the fight to control ­climate change.”

The US energy sector has been transformed by the ability to tap huge reserves of shale gas economically, employing a controversial technique known as hydraulic fracturing — or fracking — in which subterranean layers of impermeable rock are cracked open using pressurised fluids.

Shale-gas fever has spread to Europe, with drilling companies claiming that Poland, Romania, the UK and other countries have large, accessible deposits.

While many observers — including the Obama administration and the International Energy Agency (IEA) — believe the shale-gas boom will have useful medium-term environmental consequences compared to the high carbon emissions of coal, others believe it is more harmful once its extraction methods are taken into account.

Fracking has been banned in France, Switzerland and several US states. The intense water demands imposed by the technique are also a concern.

Markus Wråke, head of the IEA’s Energy Technologies Perspective group, says the shale-gas boom — rather than the explosion of renewables — has proved the most disruptive change to the energy industry in recent years.

“In some settings, gas is an enormous improvement over coal,” he says. “The question is: when does gas go from being part of the solution to part of the problem?

“We could see significant synergies with other fuels we believe are important over the longer term, like biogas and hydrogen. But the fact remains that if we have really low gas prices, it could threaten the development of some of the clean technologies that we need.”

Anders Eldrup, chief executive of Danish utility Dong, describes the future of shale gas in Europe as “still very much a question mark”.

But far from being an enemy of renewables, natural gas is “not only a companion, but a very necessary one”, he tells Recharge.

“The beauty of gas as a complement to fluctuating renewables is it’s so fast: you press a button and the gas-fired power station starts up. It’s much more flexible in that respect than coal, and it’s not as polluting,” Eldrup adds.

“From our perspective, wind, biomass and gas form the basis of our future energy mix — you can’t do without any of them.”

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