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China To Develop Unconventional Gases In 10 Years: Woodmac

Date: 26-Nov-10
Country: TAIWAN
Author: Ralph Jennings

China will start developing unconventional gas sources within 10 years to fuel its massive economy, possibly bringing down global liquefied petroleum gas prices, a senior energy consultant said on Thursday.

The expanding country faced with flat to declining production of normal gas sources in 20 years aims to do geologic tests and approve projects within a decade for resources such as shale gas, said Gavin Thompson, China gas research director with the UK-based consultancy Wood Mackenzie.

Those developments could impact world liquefied petroleum gas prices as China demands less, a change welcomed by other Asian countries that still depend on it, Thompson told Reuters.

"We're looking at a 10-year time frame," he said in an interview on the sidelines of the GASEX 2010 conference in Taipei. "They're effectively starting from zero, as the fiscal terms and regulations don't exist."

But China, the world's largest coal producer and consumer, faces geological uncertainties and potential water shortages in tapping an estimated 1,000 trillion-cubic-feet (tfc) of reserves.

"It may be that the gas is there but that access and production challenges restrict the pace of growth," Thompson said.

China also must grapple with limited access to land, a fight for mining rights and state controls on gas prices.

But as China auctions eight shale gas leases for six Chinese companies, it is unlikely to seek foreign investment aside from loosely structured joint ventures, Thompson said.

His firm expects China for the most part to develop those gases by itself for security reasons and that foreign firms understand that mission, he said.

Today, Shell and PetroChina have a loose JV to explore for shale gas deposits in Sichuan province of southwestern China, one of 12 existing unconventional gas contracts in the country, Thompson said.

China has approached Myanmar, Russia and its Central Asian neighbors about buying more unconventional gases, Thompson said.

"If it doesn't get sold to the China market, (unconventional gases) may not get started for years," he said.

Unconventional gas sources are expected to meet 15 percent of China's forecast domestic supply, or 10 percent of demand, by 2020. Its major role model the United States has taken 130 years to build up production of unconventional gases.

(Editing by Ed Lane)

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