American Gas - April 2013 - (Page 17)

shutterstock © asharkyu Though huge reserves of shale natural gas lie below China, retrieving them may prove more difficult than expected. asia Slow Go in China The Middle Kingdom may not reach its gas production goals beijing— China has huge energy demands and huge reserves of shale natural gas—two facts that have prompted the government to set targets of producing 80 billion cubic meters of shale gas a year by 2020, up from virtually zero today. However, a number of observers have noted that those goals may be overly ambitious. Bloomberg reports that 2020 output is more likely to be in the range of 18 billion cubic meters a year, based on its survey of several industry analysts. One reason behind these lower expectations is the recent auction of exploration rights to 19 shale gas reserve areas. For the most part, the 16 winning bids were from companies, such as coal miners, with no real experience in shale gas drilling that may not know precisely what they are up against. “They will have received very little data about the blocks, will have very little idea about what it is going to cost them to do exploration wells, and no idea about development costs,” one gas industry consultant told Reuters. And those costs can be significant. According to the Norton Rose law firm, the average cost of completing a shale gas well in the U.S. is between $2.7 million and $3.7 million, while in China it is $4.76 million to $12 million. These companies are likely to find themselves having to “purchase” hydraulic fracturing expertise from non-Chinese companies, increasing their costs. What’s more, China’s shale deposits tend to be deeper and more widely scattered than those in the U.S. They are often in mountainous regions and areas with limited access to large amounts of the water needed for shale gas extraction—further increasing exploration time and costs. None of this is to say that China won’t emerge with a large commercial shale gas industry—and “China may once again surprise us in its pursuit of success in shale gas,” notes Norton Rose’s report. But it is likely to take some time, and the country’s energy demands continue to grow. Perhaps in recognition of the difficulties involved with its domestic shale-gas goals, the country is expected to build several new LNG terminals this year and continue to import billions of dollars worth of LNG annually. That may be an indication that China is going to be a potential market for LNG for some time—a possibility that could factor into the U.S. LNG export debates. —Peter Haapaniemi s tat e h o u s e A Model Result Maryland legislature passes infrastructure replacement legislation annapolis—The Maryland legislature recently passed a bill to allow gas utilities to recover the costs associated with infrastructure replacement through a customer surcharge. Maryland is one of a growing number of states to implement such cost-recovery mechanisms for pipeline upgrades. Notably, the Maryland legislation includes elements found in model infrastructure-improvement spearheaded by AGA at several state membership organizations. Most recently, the model language was approved by the Council of april 2013 AmericAn GAs 17

Table of Contents for the Digital Edition of American Gas - April 2013

American Gas - April 2013
Contents
President's Message
Subject Index
LNG Sports Car: Racing Toward Acceptance
Digest
Issues
Updates
Need to Know
By the Numbers
People and Places
Water, Water Anywhere
Asia
State House
State House
Elm Street
LNG: Riding the Wave
Beyond the Headlines
Profile
Crisis Management
Jobs
Buyer's Guide: Mapping and GIS
Marketplace
Headway

American Gas - April 2013