China steps up search for gas

Nation keen to raise proportion of clean energy in its total mix

To meet soaring demand, global natural gas production is developing faster than exploration and China is working on gaining more of this clean energy source to ensure domestic supply.

BP PLC, the United Kingdom-based energy giant, has cut its global natural gas reserves estimate for the first time in decades, even though experts said the situation is temporary.

"Caused by rapidly growing natural gas consumption, the exploration for this resource is relatively slower than its production speed, which resulted in a slight reserve reduction," said Iain Conn, managing director of BP.

The company downgraded Russia's reserves estimate to 32.9 trillion cubic meters from 44.6 trillion cu m in last year's report, putting global proven gas reserves at 187.3 trillion cu m as of the end of 2012.

Iran was ranked the world's top gas reserves holder with 33.6 trillion cu m.

However, natural gas reserves will increase as shale gas exploration yields more potential resources, said Conn.

BP is one of the first group of foreign companies to participate in China's shale gas exploration by cooperating with PetroChina Co Ltd and Sinopec Group, the two largest oil and gas producers in the country.

"We are excited about the latest shale gas development in the United States and we would be happy to bring the experience and technology into China," he said.

As a major energy consumer, China's appetite for natural gas is growing rapidly as the country tries to raise the proportion of clean energy in its total mix.

During the first four months of this year, China's natural gas production was 40.2 billion cu m, up 7.7 percent year-on-year, while natural gas consumption soared 13.2 percent to 56.8 billion cu m, according to the National Development and Reform Commission.

Natural gas imports for the first four months surged 32.3 percent year-on-year to 17.1 billion cu m.

Due to the widening gap between natural gas consumption and production, China often faces gas shortages.

The NDRC said on Wednesday that the three top oil and gas companies should increase the nation's natural gas supplies and ensure supplies for residential users.

The domestic natural gas market has faced shrinking supplies and increasing demand since March, said Sublime China Information Co Ltd, a local commodity consultancy. It said the situation will continue.

To cope with increasing energy demand, China has been making efforts in upstream exploration, especially in the shale gas sector where it is believed that the country has the largest reserves in the world.

However, Adi Karev, oil and gas global leader of Deloitte Touche Tohmatsu Ltd, said China faces three major obstacles in shale gas development: infrastructure construction, technology barriers and water shortages. Those problems mean that what happens in the US cannot be easily replicated in China.

"Shale gas is set to remain a largely regional resource over the next three years because of the increased technological challenges and higher development costs of the resource," he said on Thursday in Beijing.

Beyond exploring for domestic resources, China is actively looking abroad.

CNOOC Ltd, the country's biggest offshore oil producer, confirmed early this month that it was holding discussions with Iceland-based Eykon Energy to bid for an oil and gas exploration license in the Arctic region.

A source with Sinopec Group said the company is also holding preliminary talks with Iceland over oil and gas exploration off the northeast coast of the Nordic country.