Water shortage is a constraint Sara Sjolin/MarketWatchChen Weidong is confident China can reach its shale-gas goal by 2020China is in the early stages of a fracking revolution, attempting to copy the rise in U.S. shale-gas production in an effort to combat unhealthy levels of pollution and meet a surge in energy demand. By 2020, China—the world’s largest energy consumer—aims to produce 30 billion cubic meters of shale-gas a year, up from the current level of 1.3 billion cubic meters, Chen Weidong, renowned energy expert and research chief at China National Offshore Oil Corp., or Cnooc, said at the International Petroleum Week conference on Wednesday. That would take fracking output from just 1% of all of China’s gas production to 15% in five years. “Last year, China drilled 200 new wells [bringing the total to 400], and we’ll add a few hundred a year for sure. No problem,” he said, confirming earlier government goals of reducing heavy dependence on coal, which accounts for about two-thirds of the country’s energy consumption. The call for spicing up China’s energy mix with cleaner fuels comes as the capital, Beijing, battles with high levels of pollution, evidenced by frequent “orange” smog alerts. In January, pollution reached a level that was 20 times the limit recommended by the World Health Organization, prompting many people to wear masks. There is even a Twitter account called BeijingAir that sends out daily reports on the smog levels—on Wednesday it was “unhealthy for sensitive groups”. “Over the last 10 years, lung cancer in Beijing has increased 45%. So everybody knows that the first challenge for energy is a sustainability issue,” Chen said. “We have the ‘Beijing cold’. People go to the hospital, but medicine is no use, so they leave Beijing and stay for a few months outside to get better. That’s the Beijing cold.” China has been planning for the shale-gas revolution since 2012, when the government declared it would start fracking its reserves—the largest in the world—and produce 60 billion to 80 billion cubic meters a year by 2020. However, that goal proved to be too ambitious and it was scaled back to 30 billion cubic meters in 2014 as the drilling conditions turned out to be more difficult than anticipated. “China has the biggest potential, but it’s one thing having the gas, another thing is what type of rocks, fractions, reservoirs, access to water. China has a massive water shortage,” said James Henderson, senior research fellow at the Oxford Institute for Energy Fracking uses large amounts of water in the process of releasing gas from the shale formations. Henderson also said that the state-controlled Chinese energy projects lack the innovation and entrepreneurship that helped turn U.S. shale production into a game changer for the energy market—a factor now blamed in large part for the recent slide in oil prices. “If Chinese shale takes off significantly then it’ll shake things up, but it’s not likely in the next decade,” Henderson said. In 2014, China became the second largest shale-gas producer, but it’s not aiming at taking on the U.S. as the world’s number one, Chen said. In fact, he predicts China will have to rely much more on imports over the next five years, as the rise in internal production can’t keep up with the climb in demand. “Last year, the import dependency was about 31%. By 2020 that dependency will go up to 40-50%,” he said. “We’ll get the supply from Russia and also Turkmenistan. We already got secured supplies for over 400 billion cubic meters for 2020.” In May last year, China and Russia agreed on a gas-supply contract through a pipeline in eastern Siberia, and in November, a second, nonbinding deal for a pipeline from western Siberia was reached. Sara Sjolin