Chinese proppant report sheds light on next shale gale

By Siobhan Lismore-Scott
Published: Friday, 13 June 2014

With the IEA this week underlining China’s dependence on gas, a new report produced by IM Research underlines how China’s unconventional gas market will develop – as well as its proppant markets. The report, available to purchase, is the first and only definitive report on China’s oil and gas proppants market.

The International Energy Agency this week said that Chinese demand for natural gas would double in the next five years, which is expected to drive demand for minerals used in extraction.

“Driven by booming demand, the "Golden Age" of natural gas that is now firmly established in North America will expand to China over the next five years,” the IEA said in its Medium Term Gas Market Report, released on Tuesday.

Although the IEA claims that liquefied natural gas (LNG) will meet much of this demand, a new report, China’s Proppants Market Raw Material, Supply, & Consumptionwhich has been produced by IM Research, shows that China could well rely on its unconventional gas supply.

The report, which is written by independent consultant Eileen Hao, summarises that China is pursuing three main unconventional resource routes which will help stimulate fracking activity: coal bed methane (CBM), coal-to-gas (CTG) or synthetic natural gas (SNG), and shale gas and shale oil.

China to overtake the US in shale exploration

Like the IEA, IM Research found that China could well overtake the US in terms of gas production.

“With the world’s largest technically recoverable shale gas resources at 1,111 trillion cubic feet (68% more than the US), and hosting the world’s third largest shale oil reserves at 32 billion barrels of oil, China, is going to be the next major unconventional oil and gas resource market after the US, and eventually exceed it,” the report states.

While hydraulic fracturing (fracking) remains a relatively new and emerging drilling technology in China which has yet to come to large scale commercial fruition, exploiting the reserves is advancing RAPIDLY.

“Chinese oilfield service companies are learning, developing, adopting, and innovating techniques and equipment to vastly improve the country’s hydraulic fracturing abilities, as well as partnering with global majors such as Schlumberger,” the report reads.

“Domestic exploration and production companies are forging partnerships with international oil companies in staking and evaluating unconventional oil and gas resources, as well as increasing their shale gas production targets for 2015,” it adds.

The report, which is the first and only definitive report on China’s oil and gas proppants market, covering frac sand and ceramic proppants, states that China has abundant shale gas and shale oil potential in seven prospective basins: Sich­uan, Tarim, Junggar, Songliao, the Yangtze Platform, Jianghan, Ordos, and Subei. Most of China’s proven shale gas resources are in the Sichuan, Tarim, and Ordos Basins.

But for now, activity limited

Despite this, IM Research explains, actual fracturing activity in China has been limited. Shale gas production in 2012 was only 1.8 bcf from test drilling in the Sichuan basin. During 2013, only 140-150 exploratory wells were drilled.

Although China’s fracturing industry is in its infancy, it ranks second in world hydraulic pump­ing capacity, having overtaken Canada in 2013. China’s current total fracturing pumping capacity is about 2.6m HHP (hydraulic horsepower), about 10.6% of world capacity.

Most of the pumping capacity is owned by China’s leading state-owned oil and gas com­panies: China Petroleum & Chemical Corp. (Sinopec), PetroChina Co. Ltd (part of China National Petroleum Corp. (CNPC)), and Shaanxi Yanchang Petroleum (Group) Corp. Ltd.

Proppants market

In China, the proppant market is about 3m tonnes, IM Research explains. Of this, frac sand proppants take up 55% of the current market by volume mainly owing to their lower cost, leaving ceramic proppants with 40%, and resin-coated proppants with around 5%.

Total consumption of ceramic proppants in the Chinese domestic market was about 1.2m tonnes in 2013, in which high strength ceramic proppants consumption was about 30% of total.

Frac sand is mainly produced in Inner Mongolia, Fujian, and Henan provinces. Inner Mongolia Changfan Silica Sand Co. Ltd is the largest frac sand producer with 60,000 tpa capacity.

There is only known to be one resin coated proppant plant in China, Santrol (Yixing) Proppant Co. Ltd, a joint venture with Yixing Orient Petroleum Proppant Co. Ltd and US-based Santrol Proppants, part of US frac sand major Fairmount Minerals.

Meanwhile, there has been a boom in ceramic proppant production, with around 100 plants producing ceramic proppants in China.

In 2013, the total production capacity of ceramic proppants in China was estimated at 4.5m tpa and total production estimated to be 2.05m tonnes.

 Click here for more information on the Chinese Proppant Report and to contact a member of our team

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