After an initial rush of excitement, China energy experts are raising doubts that the country will see a boom in shale gas production like that in the United States.
Interest in development has soared since last year, when the U.S. Department of Energy (DOE) estimated that China may have the largest recoverable reserves of shale gas in the world.
In the United States, modern horizontal drilling technology and hydraulic fracturing of shale rock, known as "fracking," have revolutionized the gas market and helped to drive prices down.
In 2010, shale gas accounted for 23 percent of total U.S. gas output. That share could double by 2035, the Paris-based International Energy Agency (IEA) said in a study last month.
A similar breakthrough in China could bring major benefits by reducing its reliance on energy imports and high-polluting coal.
In March, China's National Energy Administration (NEA) set a goal of producing 6.5 billion cubic meters (229.4 trillion cubic feet) of shale gas per year by 2015 and up to 100 billion cubic meters (3.5 trillion cubic feet) by 2020.
The Ministry of Land and Resources is due to hold its second auction for shale gas exploration rights this month, and over 70 companies have shown interest, the official Xinhua news agency said.
But in an unusual report, Xinhua quoted several experts as voicing skepticism about the potential in China.
An unnamed researcher with China Petrochemical Corp., known as Sinopec, complained that the country's shale gas resources are "haphazardly distributed," while development relies on foreign technology that make costs "stubbornly high."
Liu Yijun, a China University of Petroleum professor, said the industry "has not formed an effective business model" and "has a long way to go towards mass commercial use."
Zhou Jiping, the president of the PetroChina subsidiary of China National Petroleum Corp. (CNPC), was quoted as saying the future depends on accurate reserve data and independently developed technology.
Sign of misgivings
Philip Andrews-Speed, a China energy expert and associate fellow of the London-based policy institute Chatham House, said the report is a sign of misgivings about the high goals that the government has set.
"The fact that it's even mentioned in Xinhua suggests that there is doubt afoot," said Andrews-Speed in an interview.
"There are real issues of cost in China, as elsewhere, and almost no gas in China is cheap, anyway, so this shale gas is likely to be much more expensive," he said.
Comparisons of the potential in China and the United States are difficult in part because the U.S. industry has benefited from decades of geological data on large formations that can now be unlocked with the new technology, Andrews-Speed said.
China's gas tends to be in smaller deposits, while fracking requires large volumes of water for drilling, making it problematic in arid but oil-rich Xinjiang.
Chemicals used in fracking may also raise concerns in the Sichuan Basin, where exploration has started. Water is more plentiful there, but farming interests are strong.
"There you have tens of millions of farmers whose livelihoods depend on having clean water to irrigate their fields," said Andrews-Speed.
"The most unknowable uncertainty is to what extent local communities will object if this fracking activity pollutes their water," he said.
Golden rules
Environmental safeguards, full disclosure of risks and community support are the key elements for shale gas production identified by the IEA in its report, "Golden Rules for a Golden Age of Gas," released in June.
Without transparency and public support, U.S. shale gas production will peak in 2017 before falling back to 2010 levels due to limits on access to resources, the IEA said.
But if industry and regulation follow the "golden rules," production would continue to grow through 2035, according to the study, which argues that similar forces would be felt in China.
By taking the environmental path, China could raise its production of "unconventional" gas from just 12 billion cubic meters (423.8 billion cubic feet) in 2010 to 391 billion cubic meters (13.8 trillion cubic feet) in 2035.
The unconventional category includes coalbed methane extracted from coal seams in mines, but 56 percent of the total would be shale gas, the IEA said.
Without the enlightened practices, unconventional gas output in 2035 would be only 112 billion cubic meters (3.9 trillion cubic feet), or 71 percent less, the study said.
The difference could translate into more imports, coal burning, and pollution in China.
Transparency issue
But Andrews-Speed said the golden rule effect is likely to be more applicable to western democracies.
"In China, the practice of companies and government is not to be very open, or only to be open to the minimum extent when pushed very hard," he said. "So, I doubt very much that the companies will follow the golden rules unless they are partnering with foreign companies that insist on doing so."
Andrews-Speed said past practice suggests Chinese companies will hope to produce more gas by disclosing less environmental information to the public.
The IEA sees a huge difference in China's total gas production, depending on which path it takes.
If it takes the high road, the country could produce 473 billion cubic meters (16.7 trillion cubic feet) of its own gas in 2035, with 83 percent coming from unconventional sources.
If it takes the low road, total production would be only 194 billion cubic meters (6.9 trillion cubic feet), including 58 percent of unconventional gas, it said.
Last year, China produced 102.5 billion cubic meters (3.6 trillion cubic feet), suggesting it could boost output more than fourfold or by less than half that rate in 24 years, depending on which course it takes in developing its shale gas reserves.