State-owned petrochemical heavyweights such as PetroChina, Sinopec and Henan Provincial Coal Seam Gas Development and Utilization Co. Ltd. are testing the waters by making efforts to acquire and collaborate with overseas owners and developers.

China currently has 62 shale gas wells in trial development zones, 24 of which have been able to generate output qualified for industrial use. But to date, China has not started commercial production of shale gas.

There is now a growing urgency in China to further encourage the development of unconventional energy sources as it believes such steps are essential to help reduce the nation's carbon emissions and gas imports.

Difficulties

Despite the ambitious goal, several hurdles stand in the way of commercial exploration.

China's shale gas development is still at the primary stage, and has a long way to go toward mass commercial use, said Liu Yijun, a professor with the China University of Petroleum.

Chinese shale gas drillers face two major difficulties during the "fracking" process: tough geographical conditions and a technological barrier, he said.

Compared with the United States, China's shale gas is haphazardly distributed, and uncertainties still remain in the reserve appraisal process. In addition, domestic developers still largely rely on foreign technology, equipment and materials, making costs stubbornly high, he added.

Christof Ruehl, chief economist at BP, said China's huge energy demands will make it impossible for the country to give up on shale gas, adding that the key lies in technological innovation to make development safe and efficient.

The environmental impact has also complicated shale gas development in China. Since the drilling process consumes huge amounts of water and land, a number of projects have been suspended in some countries.

China and the United States have totally different environments. The per-capita land and water resources in China are far less than those in the United States, and long-term over-exploitation has made China's ecology more fragile, said observers.

China cannot copy what the United States has done. The nation needs a more land-efficient, water-efficient, economical and environmentally friendly blueprint to achieve the goal, they said.

Creating an effective business model is another test for the industry. In the United States, small companies lead the field in technological research and commercial application. Big companies adopt their methods only after the smaller ones score stable returns.

China's shale gas industry has yet to form an effective business model, said Liu Yijun.

China's shale gas industry will be open to all types of investors. Departments involved should offer tax and fiscal incentives to investors, said Liu Tienan.

"It's not enough to have macro plans and blueprints. We need to have practical measures. China needs to intensify its efforts in basic research and tries to score breakthroughs within a short period of time. We need to fully grasp the key exploration technology of shale gas," said Zhang.

Concerned departments should attach more priority to the research on shale gas exploration technology, increase input and earmark special funds for it, said Zhang. "For a more successful business mode, on the one hand, the initiative of drills should be protected; on the other hand, an appropriate threshold should be set as early as possible. Besides, the government should be highly cautious about trading resources for technologies."

Email us at: zhouxiaoyan@bjreview.com