The costs associated with shale gas are beginning to bite in China as key executives are viewing current models as untenable. China’s reserves are also more complex to extract than most, and this is not helped by the lack of appropriate drilling equipment in the country. There is a feeling that costs, particularly fixed costs, will have to fall if shale technology is to be taken up by businesses as a mainstream energy source.
Chinese energy companies are looking for ways to reduce the cost associated with shale natural gas operations, executives say.
“We’re … considering cutting the costs by buying domestic drilling equipment [and] drilling wells in a large scale,” Ma Yongsheng, chief geologist for state-owned China Petroleum and Chemical Corp., was quoted as saying by the Platts energy news service Friday.
Platts reported it costs approximately $14.7 million to drill one shale natural gas well in the country.
Another executive, Jin Shumao, vice president of Chinese energy services company SPT Group, said the cost could be cut in half by the end of the decade.
China’s shale reserves are considered more geologically complex than those in the United States, where it costs approximately $3.2 million to drill a shale natural gas well.
The U.S. Energy Department’s Energy Information Administration said last week China is the only country outside of North America that has reported lucrative deposits of shale natural gas. Shale gas in China, however, accounts for 1 percent of its total natural gas production.
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