The world’s largest gas importer is also home to the world’s largest reserves of shale gas—gas that is just sitting there, at least for now. China has been struggling to repeat the U.S. shale revolution for a number of reasons, chief of them geology, but now it may have the chance to advance its shale gas agenda. Technology is what will make all the difference.

China has recoverable shale gas reserves of 1,115 trillion cu ft, the latest estimate of the Energy Information Administration from 2015 shows. This makes the country the biggest reservoir of shale gas, with Argentina a distant second with a little over 800 trillion cu ft. Yet most of these 1,115 trillion cu ft of gas are in geologically challenging formations.

“U.S. shale reserves are like a plate, in relatively good shape and buried evenly close to the surface. For China’s shale reserves, it’s more like a plate that was smashed on the ground, and then stomped on. We’re trying to identify those scattered reserves and trying our best to get to the bigger ones.” That’s what a Sinopec chief engineer told Bloomberg, explaining the challenges that the state energy giant has encountered in its attempts to tap the country’s enormous shale reserves.

In addition to the geological problems, there is also the issue of technology exchange. U.S. fracking tech developers are wary of exporting to China on intellectual property concerns so Chinese companies are having to develop their own technology and equipment. Which is actually fine, since U.S. equipment was made for the U.S. “plate” rather than the Chinese one.

It’s this equipment and these technologies that could help Sinopec and CNPC boost their currently modest shale gas production. Last year, China produced a total 9 billion cubic meters and Sinopec and CNPC expect shale gas production to rise to 10 and 12 billion cubic meters by 2020, respectively. Related: Is The Oil World In Panic Mode?

This compares with plans for annual national shale gas production of 100 billion cu m made back in 2012. It also compares to estimated total annual gas demand of 325 billion cubic meters in 2020, according to Sanford C. Bernstein. Since 2012, the government has revised down its shale gas expectations substantially but still eyes 2020 shale gas production of 30 billion cubic meters. Compared with Sinopec’s and CNPC’s plans, Beijing is still being overoptimistic.

Meanwhile, drilling and production equipment is being adjusted to the peculiarities of the Chinese shale patch. And costs are being lowered. One example is the bridge plug, Bloomberg reports, which is used to plug wells during drilling to prevent loss of gas. Chinese drillers originally bought bridge plugs for US$30,000 (200,000 yuan) apiece. Now, they are producing them for US$2,680 (18,000 yuan) and exporting them to the company that supplied them with bridge plugs originally.

Pressure pumps are also being adjusted for China’s much deeper wells since those manufactured for U.S. shale gas wells are not powerful enough. Sinopec, for one, has developed a pressure pump that’s 40 percent more powerful than U.S. ones. It has also cut its exploration drilling costs by 40 percent over the last eight years by making all its drilling equipment in-house.

Some analysts believe that Chinese drillers also need regulatory changes to make the shale gas boom happen by encouraging more competition, but it looks like the state giants are managing even without a lot of competition. Uncomfortably high dependence on imports is a powerful motivator for innovation.

By Irina Slav for Oilprice.com

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