China’s Shale Gas Policies Impact on the Petrochemical Industry

By Sun Lujing, Jia Lingjun, Jilin Design Institute of CNPC Northeast Refining & Chemical Engineering Co., Ltd.

Developing natural gas for energy around the world

According to the “Statistical Review of World Energy 2014” and the “World Energy Outlook 2035” issued by BP, global energy demand will increase by 41% during 2012-2035 and China will be the major driver of that growth. Meanwhile, energy consumption will shift toward low-carbon energy sources and processes: the overall share of fossil fuels is expected to be driven down from 86.7% in 2013 to 81% in 2035. New energy sources such as shale gas and tight oil will hold a significant share in the growth of energy supply in the world. Natural gas will become the fossil fuel with the most rapidly growing consumption. Its annual global consumption will grow 1.9% on average, and its market share will rise from 23.7% in 2013 to 27% in 2035. The position of oil as a dominant fuel will be challenged worldwide by coal and natural gas, and its market share will fall considerably, from 32.9% in 2013 to 27% in 2035. The growth of demand for coal will become relatively slow, second to that of oil.
The energy structure in China today is unlike that of the world as a whole, China being rich in coal and poor in oil and gas. China’s energy economy, naturally enough, relies heavily, but uncomfortably on coal. Coal provided 67% of China’s primary energy in 2013, releasing a serious volume of carbon. Natural gas provides only 6% of primary energy in China – that’s 23.7% of the world average. Natural gas, therefore, has a considerable opportunity for economic growth here. Vigorously developing natural gas is the most practical option for medium and long-term adjustments to the energy structure in China. The “Strategic Action Plan for Energy Development (2014-2020)” issued by the State Council, makes clear that natural gas is to be vigorously developed, bringing natural gas to exceed 10% of primary energy consumption in 2020.

Uses of natural gas in the petrochemical industry

Natural gas is a clean energy. There is almost no emission of SO2 or dust in combustion, CO2 and NOx emissions are only 40% and 50% of those from coal, and no waste residue or waste water is generated. Natural gas is therefore widely regarded to be an excellent source of energy for clean development. Developing the natural gas industry has already become the best option for improving the environment and maintaining sustainable economic growth in China.
Natural gas can be directly oxidized to produce chemical products such as ethylene, methanol and aromatics. Also, natural gas can first be processed into syngas, from which chemical products are then produced, such as clean oil products, methanol and low-carbon olefins. Rich natural gas resources can be used to develop the methanol industrial chain and further develop downstream ethylene and propylene sectors through MTO technology.
Moreover, natural gas can be used to produce hydrogen and hydrocyanic acid. And natural gas liquids – mainly ethane, propane and butane and their mixtures – can be used as chemical raw materials.

Shale gas policies impact on China’s petrochemical industry

Reserves of conventional natural gas in China amount to 56 trillion m3 (recoverable reserves being 22 trillion m3). As for unconventional natural gas, reserves of coal-bed methane amount 36.81 trillion m3 (recoverable reserves being 10.87 trillion m3) and reserves of shale gas are 134 trillion m3 (recoverable reserves being 25.1 trillion m3). Rich reserves of natural gas hydrates have also been found. The “Strategic Action Plan for Energy Development (2014-2020)”, lays equal emphasis on continental and offshore resources and on conventional and unconventional resources, and it specifies that the major tasks in the development of natural gas are to
? accelerate the discovery of unknown reserves of conventional natural gas,
? accelerate increasing output of conventional natural gas,
? quickly remove bottlenecks in the development of unconventional natural gas and
? bring about rapid growth in both the documented reserves and the output of unconventional natural gas.
By 2020 the total newly proven geological reserves of conventional natural gas will reach 5 500 billion m3 and the annual output of conventional natural gas will reach 185 billion m3. Major breakthroughs will be made in the development of shale gas and coal-bed methane. By 2020 the output of shale gas and the output of coal-bed methane will each exceed 30 billion m3. Prospecting and assessment of natural gas hydrate resources will be actively promoted. Efforts will be made to strengthen the research of technologies for the prospecting and development of natural gas hydrates, to cultivate core technologies with independent intellectual property and to push pilot production projects. Attaining these goals will drastically increase China’s natural gas self-sufficiency, lighten the reliance on coal and mitigate the dependence on imported energy.
The “shale gas revolution” in the United States has impacted that country’s energy structure hugely, and even the world’s. US-based Siluria Technologies has commercialized large-scale conversion of natural gas to ethylene, taking advantage of rich reserves and low prices. The new process will likely shake up the ethylene industry, which has always used oil as raw material.
China has rich shale gas reserves, and energy supply and demand here are extremely unbalanced. It is regarded as the country likely to undertake the most rapid future development of shale gas, following the United States. Shale gas development in China is already rapid. CNPC and BP leaders have met in London to sign a framework agreement on strategic cooperation, covering a potential project for prospecting and developing shale gas in the Sichuan Basin. If breakthroughs were made in technologies for prospecting and producing unconventional natural gas, and then economical, large-scale shale gas production started in China, the domestic supply of natural gas would increase drastically. Consequently, the impetus to substitute coal for oil would likely be upstaged by an impetus to substitute shale gas for oil, impacting China’s energy structure and petrochemical industry profoundly.