GGP: China: Beijing Explores an Important New Energy Source

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The statements, opinions and data contained in the content published in Global Gas Perspectives are solely those of the individual authors and contributors and not of the publisher and the editor(s) of Natural Gas World.

This was originally published by Stratfor on May 18, 2017

China announced on May 18 that it had for the first time successfully extracted methane hydrates from cores drilled in the Shenhu area of the South China Sea. The development has significant ramifications for energy development worldwide. Beijing has spent more than a decade developing the necessary technology to explore, collect and extract methane hydrate samples in the hopes that it will improve China’s energy security.

Methane hydrate extraction is expensive at this point and isn’t cost competitive with other forms of energy. But the resource is abundant, and if countries are able to efficiently extract it, it could completely change the energy portfolios of many nations, including China and Japan. In fact, Japan is a leader in the field and has already been producing methane hydrates in pilot programs. Yet, commercial development of methane hydrates is at least a decade away, if it is pursued at all. It’s possible that shale gas and green energy could remain more economical in the next couple of decades, while methane hydrates development lags behind.

That the extraction took place in the politically sensitive South China Sea is not of particular concern as of now. The Shenhu area is not within the disputed maritime region and is in an area in which Chinese energy development was expected. There is no evidence that China is making these claims to strengthen its position in the South China Sea — which it is doing in other ways.

That is not to say that China will never use methane hydrates in its politics. Almost all of China’s development in the South China Sea is undertaken for commercial or economically strategic reasons. Political claims are secondary. Right now, methane hydrates are too far from being commercially viable for China to even think about trying to partner with other countries with claims in the South China Sea. The primary focus for Beijing is on technological development. If methane hydrates do become economically viable, however, political repercussions will certainly arise.

The statements, opinions and data contained in the content published in Global Gas Perspectives are solely those of the individual authors and contributors and not of the publisher and the editor(s) of Natural Gas World.