Recent Progress in Natural Gas and New

Understanding of its Position in Clean Energy in China

International Natural Gas Conference

Research Institute of Petroleum Exploration and Development-Langfang

2014.9

Contents

I. Recent Progress of Natural Gas Exploration in China

II. New Understanding of Potential of Natural Gas Resources

III. Position of Natural Gas in Clean Energy

Xujiahe in Sichuan Basin

Gaoshiti-Moxi

Kuqa

Kelameili

Middle Tarim

West Jingbian

Longgang

Dongping

Southeast well group

Deep glutenite in Songliao Basin

Sulige

I. Recent progress of Natural Gas Exploration in China

Tight sandstone

(1) Sulige

(2) Xujiahe in Sichuan Basin

(3)Deep glutenite in Songliao Basin

Carbonate rock

(4) Gaoshiti-Moxi

(5) Middle Tarim

(6) Longgang

Foreland thrust belt

(7) Kuqa

(8) Dongping

Volcanic rock

(9)Deep volcanic rock in Songliao Basin

(10) Carboniferous in Junggar Basin

Since 2000, 10 major breakthroughs and advances have been made in tight sandstone, carbonate rock, foreland

basian, and volcanic rock; in which 4 more than 1 Tcm and 6 100 - 500 bcm; simultaneously it is revealed that

carTbonate rock and tight sandstone have great exploration potential.

Deep volcanic rock in Songliao Basin

The newly-added reserves is 4 Tcm since 2006, of which tight sandstone and carbonate rock is

3 Tcm, accounting for 75%.

Distribution Diagram of Natural Gas Proved Reserve of CNPC from 2006 to 2013

The great discovery of tight sandstone and carbonate rock provides

significant support for increase of reserve

0

1000

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探明

储量

（亿

方）

致密砂岩 碳酸盐岩 前陆冲断带 火山岩 构造-岩性

Pro

ved

reserve (0

.1 b

cm)

Tight sandstone Carbonate rock Foreland thrust belt Volcanic

rock

Structure –

lithology

The accumulated gas reserves of tight sandstone for past years and annual output

account for 33.1% and 27.17% of the whole country respectively, and two major

exploration and development gas areas are developed.

Important discovery: Upper Paleozoic in Ordos Basin, Xujiahe

Formation in Sichuan Basin, Urassic - Cretaceous in Kuqa, Jurassic

in Tuha Basin and deep layer in Songliao Basin.

Reserve and output: At the end of 2012, the total proved reserve of

conventional gas had reached 9,010 bcm and the annual output is 97.8

bcm. Among them, the reserve of tight sandstone gas accounts for

33.1% and its output accounts for 27.2%.

Two major gas areas: Upper Paleozoic in Ordos Basin and Xujiahe

Formation in Sichuan Basin

Key exploration fields of tight sandstone gas reservoir in China

Upper Paleozoic in Ordos Basin

Xujiahe Formation in Sichuan Basin

Jurassic - Cretaceous in Kuqa

Jurassic in Tuha Basin

Deep layers in Songliao Basin

Tight standstone gas

2.980 tcm

Conventional gas

6.030 tcm

The accumulative proved reserve was 9,010

billioncm at the end of 2012, of which the tight

sandstone gas accounts for 33.1%.

Tight standstone gas

26.6bcm

Conventional gas

71.2 bcm

The annual output in 2012 was 97.81 bcm, of

which the tight sandstone gas accounts for

27.2%.

Basic information:carbonate rock resource is mainly distributed in

Tarim, Ordos, Sichuan basins etc. The early exploration is based on

reef and weathering crust. The large gas fields such Jingbian and

Wubaiti have been discovered. Since "11th five-year plan" the

exploration of palaeohigh carbonate rock karst gas reservoir has

been developed.

Major breakthroughs

Longgang 1 in 2006

Zhonggu 1, Zhonggu 8 and Zhonggu 21 in 2008

Gucheng 6 and Zhongshen 1 in 2010

Gaoshi 1 in 2011

Moxi 8 in 2012

Heshen 1 in 2013

Middle Tarim: Proved reserve: 353bcm Longgang: Proved reserve: 72 bcm Gaoshiti-Moxi: Proved reserve: 440. bcm West Jingbian: 222 bcm

Gucheng 6

Longgang 1

Zhongshen 1

Heshen 1

Zhonggu 5

Gaoshi 1

Moxi 8

Su 203

The accumulative carbonate rock reserve for past years and annual output respectively

accounts for 25.6% and 20.4% nationwide , and a new situation is opened recently for

exploration of ancient carbonate rock.

Carbonate rock gas

2,310 bcm

Others

6,700 bcm

The accumulative proved reserve was 9,000 bcm at

the end of 2012, of which the carbonate rock gas

reservoir accounts for 25.6%.

Carbonate rock gas

20 bcm

Others

71 bcm

The annual output in 2012 was 97.8 bcm, of which

the carbonate rock gas accounts for 20.4%.

Contents

I. Recent Progress of Natural Gas Exploration in China

II. New Understanding of Potential of Natural Gas Resources

III. Position of Natural Gas in Clean Energy

0 10 20 30 40 50 60

全国合计

盆地小计

塔里木

鄂尔多斯

其他盆地

四川

东海

柴达木

莺歌海

渤海湾

琼东南

松辽

准噶尔

天然气资源量（万亿方）

第三次资评

第二次资评

第一次资评

56 38

34

Resource Quantity of Natural Gas for Nationwide

Resources Assessment for three times

With continous development of geological theories and technology, the resource quantity increases

continuously. The recent great discovery of carbonate rock and tight sandstone promotes the understanding

of resources.

Type

Basin

Resources assessment for the third time (in 1,000 bcm)

Carbonate rock

weathered crust

Carbonate rock

reef flat Tight sandstone gas

Tarim O-∈: 1.8

Ordos O:1.3 Upper Paleozoic :

3.4

Sichuan C-Pzl:1.1

Zn：0.2

T2f-P2:

2.5

Xujiahe Formation:

0.9

Accumulative

resource quantity

for resources

5.6 4.3

Accumulative

proved reserve by

the end of 2012

2.3 2.65

Proved rate 41% 62%

Proved rate of carbonate rock and tight sand stone resources

The third nationwide resources assessment : inadequate

understanding of carbonate rock and tight sand stone,

resulting in low calculation of resources quantity.

Natural gas resources (in trillion cubic metres)

Nationwide total

Basin subtotal

Tarim

Ordos

Other basins

Sichuan

East China Sea

Qaidam

Yinggehai

Bohaibay

Songliao

Junggar

Qiongdongnan

The third resources assessment

The second resources assessment

The first resources assessment

II. New Understanding of Potential of Natural Gas Resources

New proved natural gas reserve: 14,100-19,100 billion m3.

Type

Basin

Resources assessment for the third time

(in 1,000 bcm)

Carbonate rock

weathered crust

Carbonate rock

reef flat

Tarim O-∈: 4-6

Ordos O:2-3

Sichuan C-Pzl:1.1

Zn：3-5

T2f-P2:

4.0

For key basins, the resource quantity is 14-19Tcm through the recognition and the quantity increases

by 8.5 – 13.5 Tcm compared with the third resources assessment(2006).

Remaining resource quantity: 12-17 Tcm

Gaoshiti-Moxi Proved reserve: 402.6 bcm

Middle Tarim Proved reserve: 353.4 bcm

Gucheng 6 and 8

Longgang Proved reserve: 72 bcm

Jingbian Proved reserve: 685.9 bcm

Puguang Proved reserve: 376.2 bcm

Hetian Proved reserve: 61.6 bcm

Recalculate the resource quantity according to

area abundance, analogy method etc.

The carbonate rock formation is rich in gas reservoir types and the

main direction for recent natural gas exploration.

Since various palaeohighs are developed in cratonic basin, it is favorable exploration

zone which has three major realization belts and six substitution belts.

• Palaeohigh control deposit: High-energy reef body developed easily

along the palaeohigh.

• Palaeohigh control reservoir: Unconformity development, easy to

form high-quality reservoirs such as polyphase karst.

• Palaeohigh control accumulation: Long-term development of

palaeohigh as the direction of oil and gas migration.

• Inherited palaeohigh practical area: Middle Tarim, Gaoshiti-Moxi,

etc.

Hetian Middle Tarim

North Tarim

Central Uplift

Leshan -Longnvsi Kaijiang

Yimeng Uplift

Luzhou

Palaeohigh

No. Substitution area Favorable condition Exploration area

(in 10,000 km2)

Resource potential

(100 million cubic

metres)

Evaluation

1 Ordovician in middle Tarim Three reservoir beds of Lianglitage formation, Yingshan formation, and Penglai formation

1.2 8,000 - 10,000 Ⅰ

2 Sinian - lower Palaeozoic system in Sichuan Large karst slope and developed dolomite 8.5 20,000 -30,000 Ⅰ

3 Reef body in North Sichuan Platform reef, high dolomitisation 0.6 3,000 - 5,000 Ⅰ

4 Ordovician in Maigaiti Slope of Tarim Long-term palaeohigh, phase III karst 0.8 8,000 - 10,000 Ⅱ

5 Weathering crust area of Leikoupo formation in

Sichuan

Developed weathering crust karst reservoir bed and

dicovery in exploration 1.2 2,000 - 3,000 Ⅱ

6 Dolomite below salt bed in east Ordos Source rock found and low ouput in Longtan 1 1.0 1000 Ⅱ

7 Cambrian platform margin belt in Huanmanjiaer

Depression of Tarim

Combined part of uplift and depression with large

platform margin belt developed 2.34 >10,000 Ⅲ

8 Permian dolomite area in west Sichuan Dolomite 20- 40m thick, high output of nine wells 1.6 3,000 - 4,000 Ⅲ

9 Lower Ordovician dolomite in middle Tarim - north

Tarim Developed karst and inside dolomite 1.5 8,000 - 10,000 Ⅲ

Tight sandstone gas is the important resource for the growth of

reserve and production in the future.

Type and accumulation mode of tight sandstone

Current study progress: The tight sandstone is divided into three types: large area of tight sandstone in craton

basin, deep tight sandstone in rift basin and deep tight sandstone in foreland thrust belt.

•Common point:Source and reservoir overlapped or adjacent distribution, and tight control reservoir of

large reservoir bed

•Difference: Geological background, conduction condition, seal & capping mechanism, migration &

accumulation characteristics, etc.

Key element Craton tight sandstone gas

reservoir

fault rift deep tight sandstone

gas reservoir

Tight sandstone gas reservoir of

foreland thrust belt

Geological background Source and reservoir

superimposition

Adjacent contact of source and

reservoir

Adjacent contact of source and

reservoir

Conduction condition Net conduction of hole and

fracture

Fault hole and fracture

conduction

Fault hole and fracture

conduction

Migration & accumulation

condition

Power entrapment migration &

accumulation

Fracture lithology control

reservoir

Structure lithology control

reservoir

Sealing & capping mechanism Double blocking of reservoir

and seal

Mudstone barrier bed sealing

Paste barrier bed sealing

Enrichment condition Near-source effective

enrichment

Fault effective enrichment Anticlinal effective accumulation

Regularities of distribution Near-source scale tight

sandstone

Ring groove tight glutenite body Relatively high-position tight

sandstone

Accumulation mode

Based on the new understanding

and exploration achievements, it

is estimated that the resource

quantity of tight sandstone gas in

key fields is 22,400 - 43,730 bcm

according to the tight sandstone in

broad sense by using the scale

area and migration &

accumulation factor method. And

the exploration and development

potential is great.

The accumulative proved reserve

is 2,980 bcm in the whole country

and the proved rate is 9%.

Basin

Basin area

(in 10,000

km2)

Exploration

area

(in 10,000

km2)

Series of

strata

Gas yield

(tcm)

Migration

Factor

Prospective resource (tcm)

5% 95% 50%

Ordos 25.0 10.0 C-P 563 2-5% 9.01 22.52 15.76

Sichuan 18.0 8.0 T3x 406 2-3% 6.50 9.74 8.12

Songliao 26.0 3.0 K1 233.8 2-3% 2.34 3.51 2.92

Tuha 5.5 2.0 J 16 2-5% 0.32 0.81 0.57

Tarim 56 3.5 J 195 2-3% 3.95 7.73 4.72

Total 148.5 36.0 22.4 43.73 32.44

The resource quantity of tight sandstone gas is 32 Tcm; the proved rate

is 9%; the remaining resource is aboundant.

Tight sandstone

Exploration area

Upper Paleozoic group in Ordos Basin

Xujiahe formation in central Sichuan Basin

Deep layers in Songliao Basin Kuqa in Tarim

Taibei Depression of Tuha Basin

Southern Junggar Changshen 1

Baka

Dixi 1

Central Sichuan

Sulige

Contents

I. Recent progress of Natural Gas Exploration in China

II. New Understanding of Potential of Natural Gas Resources

III. Position of Natural Gas in Clean Energy

The energy comsumption increases continuously, and especially the growth

rate is fast relatively in recent years.

By 2013, the erngy consumption had reached 3.85 billion tons of standard coal. In recent ten

years, the total energy consumption has an annual growth of 7-8% and the energy consumption

presents the fast growth trend overally in China.

中国能源消费总量增长趋势

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单位：万吨标准煤In 10,000 tons of standard coal

Growth Trend of Total China Energy Consumption

The proportion of clean energy increases in the primary consumption

structure.

From 1980 - 2013, the natural gas increased from 3.1% to 6%; the hydropower,

nuclear power and wind power from 2.0% to 9%; the petroleum from 20.7% to

19.1%

The coal decreased from 72.2% to 66.2%.

Energy Consumption Strucuture in 2013

coal

66%

w arter

pow er etc.

9%gas

6%oil

19%

Energy Consumption Strucuture from 1980 to 2013

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煤炭 石油 天然气 水电、核电和风电等

Coal

Petroleum

Natural gas

Hydropower etc.

Comparasion of fossil energy comsumption with the same calorific value and emission

Emission for 10,000 kcal heat (g)

66% 44%

Natural gas is the most practical source for clean and low-carbon

development of energy consumption.

Natural gas in fossil energy is characterized by low emission and less pollution, and

thus it is an important development trend of current clean energy.

Coal

Smoke dust Nitric oxide Sulfur dioxide Carbon dioxide

Petroleum Natural gas

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煤炭 石油 天然气 水电、核电和风电等

Change in primary comsumption structure in China

Abundant natural gas resource:The resource quantity of convetional natural gas is 56 Tcm (2005);

the estimated resource quantity of unconventional natural gas is 100 Tcm.

Currently, the natural gas is being developed significantly. The proved rate of convetional natural

gas resource is only 17% and the unconvetional natural gas exploration is still in the early stage.

The development size of nuclear power is

significantly uncertain.

• Accident of Fukushima Nuclear Power Plant: The nuclear power

generation quantity of Japan decreases from the 3rd place to the

19th place; and Germany, Sweden and Belgium have planned to

shut down all nuclear power plants in their countries.

The development size of biomass energy is very

limited. • Current status:The imported corn and soya bean of China in

2012 were 13,980,000 tons and 58,380,000 tons respectively,

accounting for 11% of the total grain yield.

• More thaisn 80% of the wind energy and solar energy in

the West and North China, but the demand for electricity

is in the East China.

The consumption structure which excessively depends on coal for a long term has caused serious ecological and environment problems;

the development of new energy is restrained by various elements, thus being difficult to reach the expected level.

Coal

Petroleum

Natural gas

Hydropower etc.

The development and utilization of wind power and

solar power are restrained by the different positions

of resource areas and consumption areas.

It is estimated that natural gas output will increase significantly and

strong support is provided for implementing clean energy strategy.

Prediction Diagram of Future Natural Gas Production in China

1500

1000

500

600

1500

1000

500

1000

4000

3600

Tight gas

Coal-bed gas

Shale gas

Conventional gas

Production: 0.1 bcm

Consumption Percentage (%)

100 million tons

of standard coal 5 billion tons 5.5 billion tons

Coal (100 million tons)

28 19.9 40

35 24.9 45

Petroleum (100 million tons) 7 10.0 20 18

Natural gas (100 million m3) 5,000 6.9 14 13

Nuclear power (100 million kWh) 14,000 5.7 11 10

Renewable energy (100 million

kwh) 18,769 7.6 15 14

Including: hydropower (100

million kwh) 14,589 5.9 12 11

Wind power (100 million kwh) 2,400 1.0 2 2

Forecast of Energy Consumption Structure of China in 2030

It is preliminarily estimated that natural gas will account

for 13% in the primary energy consumption.

Conclusion

In a long run view, the energy structure dominated by coal is

unsustainable, while clean and efficient natural gas is now the strongest

stratigic choice for optimizing energy structure, saving energy and

reducing the emission in China. It is estimated that China will estblish a

low-carbon, clean, effieciet and safe new energy systen through

development of natural gas, nuclear energy and renewable energy and

further optimization of the energy structure by 2050 or so.