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China will need years of gas imports while developing shale, EIA official says


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China will need years of gas imports while developing shale, EIA official says

Even with unconventional drilling role models to follow in the U.S., China's prospective shale developers face a steep learning curve before they can begin contributing to the nation's gas supplies in earnest.

China intends to be one of the major shale-producing countries, but Ian Mead, the U.S. Energy Information Administration's assistant administrator for energy analysis, said Oct. 18 that he sees that as a more distant development.

"There's a lot of talk about piggybacking [off of other developments], but from my understanding ... a lot of the human capital that is developed is very specific to individual basins," Mead said at the LDC Gas Forums Rockies and West conference in Broomfield, Colo. "We do expect development, but we see it much more [in the] long run as prices get higher."

China has what Mead described as a "long tradition" of wanting to develop and supply its own energy, largely for national security and independence. But as the nation moves away from coal-fired power generation, there will likely be a gap between China's increased gas use and increased gas production, Mead noted.

"It's going to take them a while to get there, and in the interim as they're developing those shale resources, they're going to import more gas as they try to switch their electricity production away from coal," Mead said. "It's going to take some time to develop the infrastructure to deliver those resources to market and also develop the human capital to develop those resources, as well."

The EIA's international energy outlook released in September projected that Chinese gas imports would remain steady from 2015 to 2040 as the country boosts its gas production. By 2040, the EIA predicted, China would become the second-largest shale gas producer, with shale accounting for nearly half of the country's total gas production.

For prospective gas importers, the EIA sees LNG prices remaining relatively palatable in the years to come, although the prices are expected to rise some, Mead said.

"What I will say is we expect them to remain relatively low," Mead said. "We do include a margin for processing the LNG and getting it ready to be shipped, and transportation margin. … I think we're talking in Asian markets maybe about $8 per unit."