China has declared success in extracting “flammable ice” or methane hydrates from under sea.
It is also the first nation to achieve “continuous operation on a floating production platform”, the official Xinhua News Agency reported.
Since May 10 it has been bringing up the gas to the surface and lighting it up. The drilling has been going on for the past seven days and 19 hours, with daily output of the gas exceeding 10,000 cubic meters, according to the report.
The world’s total flammable ice reserve is estimated at 16.7 trillion tons of oil equivalent, more than double the combined reserves of traditional fossil fuel including coal, oil, natural gas and shale gas.
China alone has over 100 billion tons of oil equivalent of flammable ice deposits, which can meet the nation’s energy demand for 200 years.
Does that mean China would soon achieve self-reliance in energy without the need to import oil and gas?
In fact, China was a latecomer to the methane hydrates scene, but has been catching up fast since the discovery of promising reserves in the South China Sea in 2007.
By contrast, Russia, Canada, the United States, Belgium, Japan, South Korea and India have all tried to tap into the new energy source with little success.
So why is China making better progress despite being a latecomer?
In most other countries, flammable ice development has been stalled by vested interests like the petrochemical industry.
If commercial-scale gas can be extracted from flammable ice, the fuel source would eventually replace oil and cause trillions of dollars of losses for the oil giants.
Second, the cost of mining flammable ice and converting it into natural gas, which is about US$1 per cubic meter, is forbiddingly expensive. For natural gas, the cost is only 14 US cents.
The exceedingly high costs have been discouraging other countries from spending more efforts on flammable ice projects.
China, on the other hand, has outlined a timetable for commercial production of flammable ice. The nation intends to focus on mining and technical preparations from 2008 to 2020, and start trial commercial production between 2021 and 2035.
However, the recent breakthrough in continuously stable gas production could accelerate the process. The nation is expected to kick off commercial production before 2030.
Experts estimate the eventual cost of flammable ice may drop to 10 US cents in the long run, which would make it even more economical than natural gas.
If China goes full blast on the new energy, state-owned oil majors are likely to be involved. Related equipment and service companies will also benefit.
In fact, both China Oilfield Services Ltd. (02883.HK, 601888.CN) and Sinopec Oilfield Service Corp. (01033.HK, 100871.CN) posted sharp gains recently.
Gas distributors like China Gas Holdings Ltd. (00384.HK) and China Resources Gas Group Ltd. (01193.HK) also stand to gain.
This article appeared in the Hong Kong Economic Journal on May 22
Translation by Julie Zhu
[Chinese version 中文版]
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