China has unveiled a five-year plan for its emerging shale gas industry as the government seeks to replicate the US success in extraction of the cleaner-burning unconventional fuel.
The 2011-2015 plan, made public yesterday by the National Energy Administration, confirmed the government will increase fiscal support and reduce tax for explorers and producers. It also seeks financially strong participants and urges increased cooperation with foreign partners for technological know-how.
China is believed to hold the world’s largest deposits of shale gas but to date there has been little commercial production.
The fuel is trapped in formations previously thought to be unreachable. New technologies known as horizontal drilling and hydraulic fracturing, or “fracking,” have successfully unlocked deposits in the US, helping the country cut its dependence on foreign gas.
The plan offers general policies regulating the sector, without giving too much update on details. But it said the sector shouldn’t be developed at the cost of the environment, banning shale development in nature reserves, scenic spots and areas with a rich drinking water source.
The ban marks the government’s effort in sustainable development and shows that China wants to avoid the mistake in the rare earths industry where years of rampant exploration and mining had caused damage to the environment.
China has previously unveiled policies to support shale gas development but experts have blamed the policies, not technology, as the biggest hurdle.
For example, the government’s output volume-based subsidy program has been criticized as ineffective. Because shale gas development needs huge capital investment in the exploration stage, a pre-production subsidy would definitely make more sense, said Zhang Yousheng, a researcher at the Energy Research Institute of the National Development and Reform Commission, China’s top planning agency.
Analysts also questioned whether China could meet its shale gas production target of 6.5 billion cubic meters by 2015 and 60-100 billion cubic meters by 2020.
The new plan doesn’t mention the production targets.
