China to auction shale deposits amid rising dependence

Today, the Chinese Ministry of Land Resources will hold a domestic auction for the shale gas development rights to a 695 square kilometre swath of land in China’s Guizhou province.

The auction comes as China increases efforts to rely more on fuel from natural gases—rather than coal, which doesn’t burn as cleanly, but constitutes about 60% of China’s energy—to combat environmental issues, such as severe levels of air pollution,

While China does have the largest shale reserves in the world, its ability to harness its resources has been hindered by drilling costs and geological complexity. As such, Beijing is forced to import about 30% of its gas, which it hopes will constitute 10% of its energy consumption by 2020.

Even though Beijing’s efforts to bolster domestic production of natural gas, particularly shale gas, have led to marked increases, production is not expected to surpass domestic consumption anytime soon. As long as prices remain low, it will be more economically sensible for China to import shale gas than to strive for complete domestic production.