OREANDA-NEWS. March 28, 2014. China, which sits on the world’s largest shale reserves, may exceed its 2015 output goal, as a new project in the nation’s southwest and the promise of fresh investment leave government targets looking outdated.

China Petrochemical Corp., the parent of the listed company known as Sinopec, agreed last week with local government to build shale gas capacity at its Fuling site to 5 billion cubic meters a year by 2015. It suggests a national target of 6.5 billion cubic meters will be met or surpassed.

“China can easily beat the 2015 target, thanks largely to the accelerated pace of development from Sinopec’s Fuling project,” said Shi Yan, an analyst at UOB-Kay Hian Ltd. in Shanghai. Shi said contributions from other shale producers could lift 2015 output as high as 10 billion cubic meters.While China’s reserves are almost double that of the U.S., its production target is meager compared to U.S. output in 2012 of 266 billion cubic meters. High costs, difficult terrain and lack of infrastructure have stunted development and cast doubt on whether even its existing targets could be met. As concerns over coal-fired pollution mount, the nation is pushing harder to unlock its potential shale bonanza.

“China is on the way to achieve its 2015 target, especially with the suddenly expanded capacity from Sinopec,” said Gordon Kwan, regional head of oil and gas research at Nomura Holdings Inc. in Hong Kong. He said PetroChina Co., the nation’s biggest oil and gas company, may produce as much as 2 billion cubic meters of shale gas in 2015.

Output Surge

China’s annual shale gas production surged more than fivefold in 2013 to 200 million cubic meters a year, according to the Land and Resources Ministry. The country consumed 169 billion cubic meters of gas in 2013, with about one third coming from imports.

The Fuling project recorded daily production of 2.2 million cubic meters on March 2, up from 1.5 million cubic meters, according to the Chongqing Daily, the official newspaper of the municipality where Fuling is located. Sinopec Chairman Fu Chengyu said the Fuling agreement signals the start of a “massive” development phase for shale gas in China, according to a report on the land ministry’s website on March 4.

At the National People’s Congress in Beijing, which wraps up this week, both Fu and Zhou Jiping, the chairman of PetroChina and its parent China National Petroleum Corp., said they would open up shale development to private investment, as part of government-driven reforms.

Collective Effort

The collective effort makes the 2015 target achievable, said Neil Beveridge, a senior research analyst with Sanford C. Bernstein & Co. in Hong Kong. However, it will still be “a bit of a stretch” to meet China’s far more ambitious annual target of 60 billion to 100 billion cubic meters by 2020, he said.

China holds 25.08 trillion cubic meters of exploitable onshore shale-gas reserves, the land ministry said in March 2012. The U.S. has 13.65 trillion cubic meters of technically recoverable gas from shale formations, its Energy Information Administration said in January that year.

Lv Dapeng, Sinopec’s Beijing-based spokesman, and Li Runsheng, CNPC’s Beijing-based spokesman, didn’t answer two calls each to their office lines seeking comment on the companies’ production targets.