Shale Gas Potential in China: A Production Forecast of the Wufeng-Longmaxi Formation and Implications for Future Development 20-17

EfD Discussion Paper
1 June 2020

Yan Chen, Jintao Xu, Pu Wang

Developing the abundant shale gas in China is a potential means to address the country’s challenges in air pollution and carbon emissions. The purpose of this paper is to re-evaluate the role of
shale gas in China’s future energy mix by forecasting the production potential of the most promising shale gas play—the Wufeng-Longmaxi Formation (WL). We use a Difference-Index analogy method and well-level U.S. shale gas drilling data to forecast the production potential and use a scenario simulation method to propose optimal drilling plans. The results show that the Wufeng-Longmaxi Formation has the potential to produce 70 billion cubic meters of natural gas per year (Bcm/yr), which is 60% of the gas
imported into China in 2018. With technology improvement and drilling of more wells, the target of 80- 100 Bcm/yr set by the government can be achieved solely by extraction from WL. We find that shale gas drilling is profitable with a well-head price of 1.5 Chinese Yuan per cubic meter. The study indicates that a shale gas boom in China is possible, depending on a more competitive market both upstream and downstream. The successful development of shale gas will change the country’s energy mix to become cleaner and lower-carbon.

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Publication | 10 June 2020