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China Briefings

Reports on China issued by Samsung Economic Research Institute

Shale Gas Projects

Shale Gas Projects

Samsung Economic Research Institute Beijing Office

July 31, 2013

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Recognizing the enormous potential of shale gas, China has established numerous plans to harness its abundant shale gas reserves through policies that include subsidies and preferential treatment. The development of shale gas will bring about huge benefits. Environmentally, it will decrease pollution, as the clean-burning energy source reduces China's high dependency on coal. Economically, it will cut the price of natural gas and stabilize oil prices as it becomes a substitute for natural gas.

In its endeavor, the government has attracted many companies for its shale gas projects though auctions. Since the government approved the engagement of foreign-invested companies in the form of joint-ventures, leading Chinese oil companies such as PetroChina and Sinopec have partnered with foreign companies such as ExxonMobil and BP. Chinese oil companies have actively engaged themselves in shale gas projects based on the advantage that shale gas in mostly found in the same areas as oil reserves.

However, there are challenges in developing shale gas. China lacks the sophisticated technology needed for drilling, and has yet to establish a criteria and monitoring systems. Also, creating revenue from the projects requires a long period of time. Still, it is expected to create new growth opportunities for the petrochemical industry, supplying raw materials at low costs and raising the price competitiveness of Chinese companies.

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