China's shale gas development has not reached the expectations of ConocoPhillips and other energy giants to withdraw

After the United States and Canada, China became the third country in the world to achieve commercial development of shale gas in 2014. However, since last year, international energy giants such as ConocoPhillips and Shell have successively withdrawn from the exploration and development cooperation of shale gas in China, which cast a shadow over China's shale gas exploration and exploitation.
On November 9, Li Fanrong, deputy director of the National Energy Administration, and his party went to the Fuling shale gas field for investigation. Li Fanrong said that it is necessary to speed up the construction of a tens of billion cubic meters of Fuling shale gas field, and make greater contributions to the creation of a new situation in the national shale gas demonstration zone. Release positive signals for the development of shale gas.
According to data released by the Ministry of Land and Resources in April this year, the national shale gas production in 2015 was 4.471 billion cubic meters, a year-on-year increase of 258.5%, and the output growth rate was considerable. But even with such rapid growth, China's shale gas production has not yet reached the Chinese government's previous annual production target of 6.5 billion cubic meters in the "Shale Gas Development Plan (2011-2015)".

Multiple factors cause shale gas development to fail to meet expectations
The smog in many cities in China reminds government policymakers every day that China urgently needs more natural gas to replace coal. Perhaps this is also the biggest driving force for developing China's shale gas. However, the development of shale gas is still not up to expectations.
Qin Ping, deputy editor of the International Academic Journal of Environment and Development Economics and researcher at the National Development and Strategy Institute of Renmin University of China, said in an interview with the China Business Journal that it was mainly because of the international The oil price continued to fall, the profit margin of oil and gas exploration and development continued to be compressed, and the input cost of the shale gas industry was much higher than that of conventional oil and gas. The superposition of various factors made the Chinese shale gas industry difficult to start. On the one hand, it is unprofitable or less profitable. On the one hand, it carries the heavy responsibility of providing safe and relatively clean energy substitutes. Is development still not developing? China's shale gas industry is indeed facing a very embarrassing situation.
In Qin Ping's view, the fundamental challenges encountered in the development of shale gas resources in China can be summarized as follows.
First of all, the fiscal and taxation policies and block policies are unstable, and the uncertainty in the future is large, which affects the enthusiasm of enterprises for investment. In terms of fiscal and taxation policies, subsidies for shale gas production have been decreasing year by year. During the “Thirteenth Five-Year Plan” period, the subsidy for shale gas will be reduced. The subsidy standard for 2016-2018 is 0.3 yuan/m3, and the subsidy standard for 2019~2020 is 0.2 yuan/m3, which is 50% within five years. In terms of block policy, the exploration and development rights of upstream resources in China's oil and gas industry have long been monopolized by the three major state-owned oil companies, which have more than 95% of exploration rights. The block resources obtained by local state-owned enterprises and private enterprises participating in the bidding are not enriched, and the exploration and mining costs are relatively large, and the progress is very slow.
Secondly, the existing pipeline network, storage and transportation facilities are lagging behind, and market development is constrained. China's gas pipeline network construction level and consumption level do not match, and the gas distribution network such as branch line and pipe network connection line is far from mature, and there are also various problems such as monopoly and low interoperability. In addition, China's shale gas resource enrichment areas are mostly concentrated in the central and western mountainous areas. The construction of the pipeline network is difficult and costly, which is not conducive to shale gas transportation and downstream market development.
At the same time, there are few national environmental protection laws and regulations specific to the oil and gas industry in China. Nowadays, the development of shale gas in China is open to all types of companies. Therefore, the lack of industry-specific environmental management regulations is the main flaw of the supervision system. May imply the huge environmental risks faced by China's shale gas development.

Urgent system policy support
Although shale gas production has not achieved the government's planning goals, in the long run, the future world shale gas development is still expected to usher in strong growth, and the prospects for China's natural gas market are still bright.
In terms of shale gas exploration and demonstration area construction and development, China has initially formed four shale gas production areas in Fuling, Changning, Weiyuan and Yanchang, with an overall production capacity of over 7 billion cubic meters per year, which has begun to take shape, including Fuling Page. The Yanqitian and Changning-Weiyuan producing areas have entered the stage of stable gas production, and there is no reason to withdraw from the shale gas field.
At the same time, the main technical system of shale gas in China has basically been formed, and the technical equipment for exploration and development in the shallow area below 3,500 meters has basically achieved localization and scale application. The central and local governments have also attached great importance to the exploration and development of shale gas resources and introduced support and encouragement policies for the shale gas industry.
However, in the case of policy subsidies decreasing year by year and oil prices sluggish, shale gas is difficult to achieve profitability and commercial exploitation in the short term, and industry development is limited.
The typical characteristics of shale gas reservoirs in China are deep burial, thin thickness and overlapping layers. The geological conditions of shale gas reservoirs are more complicated than those in the United States and Canada. Gas reservoirs are generally buried in underground below 3,000 meters, which requires higher mining technology. At present, shale gas wells with a depth of more than 3,500 meters under fracturing technology are not yet profitable in China.
In this context, Qin Ping believes that the basic economic problem of shale gas development is to attract more capital into the industry. The Chinese government has also made many attempts to attract more capital injections to promote the development of the shale gas industry, with poor results. At present, state-owned oil companies with the advantages of technology, experience, capital and policy are still the hope of China's shale gas development.
The key question now is how to motivate state-owned oil companies to carry out high-risk investments such as shale gas drilling, especially in the current situation where the demand for natural gas in the natural gas market has shrunk.
In this regard, Qin Ping told reporters that China's shale gas industry support policy is basically financial subsidies, lack of other important supporting policies, such as environmental protection, local coordination, protection of relevant farmers or residents' interests and other detailed policies. The development of shale gas is actually a large system involving taxation, land, regulation, environmental protection and other aspects, and needs the support of the entire policy system. At the same time, we should speed up the formulation of relevant production standards and environmental standards that are suitable for China's national conditions.
In addition, the most important stakeholders in the development of shale gas are local governments and local people. The presence or absence of local governments and whether the local people support the shale gas project can have a great impact on the local development. Consideration should be given to designing certain policy incentives to ensure the relevant interests of provincial, municipal, county, township governments and local people in the development of shale gas, and to obtain their active participation and support.
In order to solve China's increasingly serious environmental problems, replacing coal with clean energy such as natural gas has become the top priority of China's energy structure adjustment. However, China's complex geological structure and other unfavorable factors mean that China's shale gas production costs are difficult to reduce in the short term; state-owned oil companies have multiple advantages, which have become a breakthrough in shale gas technology, cost-effective improvement and promotion of shale gas industry. Hope for development, but to achieve this hope requires the government to give more powerful incentives and to develop more reasonable mechanisms.

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