Natural Gas Production Falls Short in China




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Natural Gas Production Falls Short in ChinaSHOUYANG, China — Jin Peisheng, a drilling rig foreman, knows the challenges of trying extract natural gas from a coal seam under the cornfields here in north-central China.

Cracks in the subterranean coal are flooded with water that needs be pumped out before the gas will emerge. The coal seams are so cold that gels injected into the well, which are meant help the gas, sometimes become gummy and block the flow instead. And there is constant concern about hitting the labyrinths of active coal mines that honeycomb the area.

“The big uncertainty is what’s underground — if there’s a tunnel, that’s a big danger. It would be dangerous for the miners,” Mr. Jin said.

Faced with severe air pollution from coal and a rising dependence on energy imports, China has been eager follow the United by rapidly increasing natural gas output. Replacing coal with natural gas has also been central Beijing’s hopes limit emissions of global warming gases in China, the world’s largest producer of carbon dioxide by a wide margin.

But China’s ability to extract sufficient natural gas is in serious doubt. Despite heavy investment and strong government support, China’s natural gas production is growing at a slower pace its decelerating economy. China’s production of natural gas increased just 6 percent last year and 4.4 percent in 2012.

China’s main problem is that shale gas production has fallen far short of expectations. That has left the country relying on alternative methods considered also-rans by American standards, like pumping natural gas from coal fields.

Now, the Chinese government appears to be acknowledging the shortfall. Wu Xinxiong, the director of the National Energy Administration of China, unexpectedly said in a speech this summer that China’s target for domestic natural gas production in 2020 was only 30 billion cubic meters for shale gas and another 30 billion cubic meters for coal seam gas. Just years ago, the National Energy Administration estimated that China would produce 60 billion to 100 billion cubic meters of shale gas alone by 2020.

If Mr. Wu’s forecast comes true, shale gas and coal field gas would each only 1 percent of China’s electricity generation needs in 2020.

“If the population and economy keep growing, and extensive energy use continues, sustaining China’s energy will be hard,” Mr. Wu warned.

Gas production has been slow to rise despite energetic efforts by Beijing to make it financially attractive for energy companies, including direct subsidies for shale gas production. The Chinese government also announced on Aug. 13 that it would raise urban wholesale prices for natural gas at the end of the month by roughly 18 percent for industrial users.

With domestic supplies increasing slowly, China has been looking elsewhere. It agreed in May to buy gas from Russia under a 30-year, $400 billion . And it has begun importing liquefied natural gas from Qatar, Australia and Yemen.

The natural gas is sorely needed. Beijing plans to retire four coal-fired power plants by the end of this year and replace them with gas-fired plants in an effort to reduce air pollution.

But China does not have enough gas for a larger-scale conversion of power plants to gas. So the national government has already told smaller, less influential cities to stick with coal for now, and has discouraged businesses from investing heavily in gas-fired equipment.

Gas had looked like one of the few remaining ways for China to reduce its addiction to coal. China’s nuclear power program slowed after Japan’s triple meltdown in Fukushima. Efforts to expand hydroelectric power have run into environmental concerns as well as the huge cost of resettling people from areas flooded when dams are built to make artificial lakes. Solar power and wind power are growing rapidly, but from small bases.

The revised figures from Mr. Wu represented China’s first official acknowledgment of what Western experts have been saying for many : The country will not approach the success of the United in shale gas anytime soon.

Shale gas deposits lie much deeper in China in the United , which greatly increases drilling costs. Chinese shale also tends to be laden with clay and is much wetter American shale, making it harder to crack the shale and the gas through pumping liquids and sand underground, the process known as hydraulic fracturing, or fracking.

After 40 million years of powerful earthquakes as the Indian subcontinent plowed into southern Asia, the main shale gas seams in western China are jumbled underground, instead of lying flat like a stack of pancakes, as in the United States, said Jeff Layman, a partner in the Beijing office of Baker Botts, the big Houston energy law firm.

In March, Sinopec, a Chinese oil giant, announced the country’s first commercially viable shale gas deposit, located outside Chongqing, and predicted annual production would reach a hefty 10 billion cubic meters by 2017. But the company has released few details, prompting foreign energy experts to begin asking whether all of the seams are truly shale, although Sinopec insists they are.