Integrated value of shale gas development: A comparative analysis in the United States and China

Renewable and Sustainable Energy Reviews (xxxx) xxxx–xxxx

Contents lists available at ScienceDirect

Renewable and Sustainable Energy Reviews journal homepage: www.elsevier.com/locate/rser

Integrated value of shale gas development: A comparative analysis in the United States and China ⁎

Yan Yanga,b,c, Limao Wanga,d, , Yebing Fanga,b,d, Chufu Moua,d a

Institute of Geographic Sciences and Nature Resources Research, Chinese Academy of Sciences, Beijing 100101, China The CAE Center for Strategic Studies, Chinese Academy of Engineering, Beijing 100088, China c Department of Chemical Engineering, Tsinghua University, Beijing 100084, China d University of Chinese Academy of Sciences, Beijing 100049, China b

A R T I C L E I N F O

A BS T RAC T

Keywords: Shale gas development Integrated value US-China comparison Fuzzy-AHP evaluation

This paper is to explore the differences of the integrated value of shale gas development between the US and China. On the basis of an extensive literature survey and 17 in-depth personal interviewswith domestic experts, a fuzzy-AHP model is exploited herein to evaluate the development of shale gas in the US and China. The fuzzyAHP model encompasses 21 indicators, which can be further categorized into 4 critical factors: (1) market prospects, (2) environmental impacts, (3) conditions of resource & occurrence, and (4) general conditions of extraction & utilization. Among the 21 indicators, market demand, cost and price, technologies, gas content, water contamination/supply, and policy contribute significantly to the integrated value of the model. According to the integrated value of the shale gas development in the US and China, the comparative analysis suggests that there is a large gap between these two countries. Furthermore, differences in shale gas development between the US and China are identified and reasons for these differences are analyzed. The US-China comparative analysis and the experience from US suggest that government policies will be crucial to determine the future development of shale gas in China and other countries.

1. Introduction

has the most advanced shale gas exploitation technology and successful large-scale commercial development market, while China has the most potential for shale gas development [1,16,17]. Based on this background, it is of practical significance to conduct a comparative evaluation of the integrated value of shale gas development between the US and China. To this end, we combine data and information collected from a broad range of various sources. An extensive literature survey (including academic publications and grey literatures) and 17 in-depth personal interviewswith domestic experts is carried out. The personal interviews have been conducted during the period October 2013 to March 2015 with 17 in-depth personal interviews who are leading experts in the field of energy, environment, ecology, geology, water resources, and resource policy. After searching the literatures pertaining to the theme of comparison of shale gas development between the US and China, we find most studies focused on the micro-level comparative study between the US and China [18–26], such as the shale gas accumulation mechanism [22], reservoir characteristics [22,26], evaluation of resource potential [18], development conditions/barriers (e.g., core technologies and water supply, etc.) [20,23,25], and environmental concerns [19,21,24]. For example,

In the long term, the global community probably faces serious challenge of climate change and relative energy shortage [1]. The US and China are typical countries that face these challenges most acutely. As the two largest economies in the world, the US and China have a rapidly growing energy demand. Both of them have inescapable responsibility and obligation to deal with international energy market stability and global environmental issues. As the supply of conventional energy has become increasingly tense, both of the two countries need to employ a sustainable energy development strategy with an optimized energy consumption structure and rational exploitation of unconventional energy resources [1]. Shale gas, an emerging unconventional energy source in recent decades, has received increasing attention worldwide [2–12]. Compared with other fossil fuels, shale gas is a clean-burning and efficient energy resource, which contributes to reducing a country's overdependence on high-energy and high-pollution resources. Therefore, shale gas offers more options for reducing air pollutants and greenhouse emissions [1,3,5,13–15]. In the world, the technically recoverable reserves of shale gas resources in the US and China rank first and second, respectively (Fig. 1, Table 1) [16]. The US ⁎

Corresponding author. E-mail addresses: [email protected], [email protected] (Y. Yang), [email protected], [email protected] (L. Wang).

http://dx.doi.org/10.1016/j.rser.2016.11.174 Received 11 September 2015; Received in revised form 30 June 2016; Accepted 12 November 2016 1364-0321/ © 2016 Elsevier Ltd. All rights reserved.

Please cite this article as: Yang, Y., Renewable and Sustainable Energy Reviews (2016), http://dx.doi.org/10.1016/j.rser.2016.11.174

Renewable and Sustainable Energy Reviews (xxxx) xxxx–xxxx

Y. Yang et al.

may fill major gaps in our current knowledge. The aim of this paper is therefore to contribute to the body of scientific literature on the influential factors and strategy of shale gas development, and to provide academics, industry participants, and policy-makers with a useful reference work that should facilitate the formulation of clean energy policies in China and other countries.

2. Methodology 2.1. The conceptual framework In this paper, evaluation of the integrated value of shale gas development is based on Fuzzysettheory and Analytical Hierarchy Process (AHP). The theory of Fuzzyset, put forward by Lotfi A. Zadeh in 1965 [28], is an effective information perception/cognition-based approach to address computing problems when structure is complicate and data is insufficient [29]. In addition, fuzzy set can deal with multiple criterion conflict and achieve an optimization of assessment. Analytical Hierarchy Process (AHP), originally proposed by Thomas L. Saaty in 1980 [30], also provides a useful means for multi-objective and multi-criterion conflict problems [29,30]. For the purpose of improving Fuzzy/AHP usability, several studies indicated that the above two approaches can be combined together to form a fuzzyAHP model [31–35]. For example, Salehi et al. (2013) [31] used a fuzzy-AHP approach to conduct the soil fertility evaluation, considering the major factors of soil salinity, phosphorus, potassium, and organic carbon for rice cultivation in Iran. Taking advantages of the fuzzy consistent matrix from Fuzzysettheory [36–38], this paper has established a fuzzy-AHP comprehensiveevaluation model (Fig. 2) [39]. The evaluation model produces an integrated value which provides a comprehensive assessment on shale gas development. The evaluation model contains four critical factors (i.e., market prospects, environmental impacts, conditions of resource & occurrence, and general conditions of extraction & utilization), which are constructed by multi-level indicator system with priority weight value [40–43]. The establishment of the evaluation model can be achieved by the following four steps: (1) establishment of an evaluation indicator system and standard values; (2) datastandardization; (3) relative importance assignment and prioritization of indicators using Delphi combined with Analytic Hierarchy (AHP); (4) comprehensive evaluation (i.e., calculating the fuzzy integrated value of US-China shale gas development, U), and comparative analysis according to the U.

Fig. 1. Major global countries' mineable shale gas resource potential.

Zhao et al. (2012) [18] used a Monte Carlo probability model and conducted a prediction of technical mineable resource potential in China (around 9.2 trillion−11.8 trillion m3), indicating the considerable prospects in China shale gas development. Others discussed the implications for introducing the US shale gas revolution to China and policy options for China shale gas development based on a qualitative view [1,3,5,6,15,27]. For instance, Tian et al. (2014) [6] conducted a comparison with the US experience to elucidate how China might overcome the innovation problem inherent in developing shale gas. However, taking comprehensive factors into account to quantitatively evaluate the integrated value of US and China shale gas development is rarely found. This paper has established a multi-factor comprehensive evaluation system derived from the fuzzy-AHP model to demonstrate the prospects of the large-scale development of shale gas. The evaluation system contains 21 indicators which can be further categorized into 4 critical factors: (1) market prospects, (2) environmental impacts, (3) conditions of resource & occurrence and (4) general conditions of extraction & utilization (see Fig. 2 and Table 2). Based on the fuzzyAHP model, we attempt to identify the key influential factors for shale gas development. Differences between the two countries and possible explanations for these differences are in-depth discussed. On the basis of the evaluation results, policy suggestions and conclusions are drawn to facilitate the formulation of clean energy policies in China and other countries. Both the evaluation of the integrated value under a multifactorial comprehensive evaluation index system and a comparative analysis Table 1 Geographical distribution of mineable shale gas resource potential in the US and China. US Region Northeast

Southeast

Mid-Continent

Texas

Rockies/Great Plains

China Shale gas favorable area Marcellus Utica Other Haynesville Bossier Fayetteville Woodford Antrim New Albany Eagle Ford Barnett Permian Niobrara Lewis Bakken/Three Forks

Proportion of resource potential (%) 31.78 9.56 2.50 13.87 4.91 4.13 6.63 0.43 0.17 10.25 6.20 2.93 4.91 0.09 1.64

Region Sichuan Basin

Yangtze Platform Jianghan Basin

Greater Subei

Tarim Basin

Junggar Basin Songliao Basin

2

Shale gas favorable area Qiongzhusi Longmaxi Permian L.Cambrian L.Silurian Niutitang/Shuijintuo Longmaxi Qixia/Maokou Mufushan Wufeng/Gaobiajian U. Permian L.Cambrian L.Ordovician M.-U.Ordovician Ketuer Pingdiquan/Lucaogou Triassic Qingshankou

Proportion of resource potential (%) 11.21 25.74 19.28 4.04 9.33 0.99 0.63 0.90 0.63 3.23 0.18 3.95 8.43 5.47 1.43 1.52 1.70 1.43

Renewable and Sustainable Energy Reviews (xxxx) xxxx–xxxx

Y. Yang et al.

Basic materials of shale gas development

Market prospects

Environmental impact

Conditions of extraction & utilization

Infrastructure

Actual policy-support level

Earth surface conditions

Evaluation indicator standard system Fuzzy comprehensive evaluation

Geological survey extent

Acquisition

Water supply

Core technologies

Deposit depth

Tectonic conditions

Effective thickness

Weight assignment

Thermal maturity

Organic matter abundance

Gas content

Other external environmental costs

Carbon emission effect

Air contamination

Water contamination

Water occupation

Annual cash yield ratio

Unit cost

Unit price

Market demand

Standard establishment

Conditions of resource & occurrence

Integration

(Regional)indicator data of the evaluation object

Comprehensive evaluation result of US-China shale gas development

Fig. 2. Comprehensive evaluation model of shale gas development.

demand, unit price, unit cost, and annual cash yield ratio. Among them, the unit cost refers to the extraction cost, not including the external environmental costs. Moreover, the unit price refers to the gas pipeline price for civil use. With huge amount of market demand for gas, the US has achieved an increasingly rapid development in shale gas industry in the past decades. In the US, shale gas production has increased from 90.6*108 m3 in 2000, to 1510*108 m3 in 2010, and 3806*108 m3 in 2014 [48,49]，accounting for more than 45% of the proportion of its domestic natural gas energy structure [1]. As technology improving, the comprehensive extraction cost greatly reduced (cost of drilling a horizontal well in shale formations was less than 20 million Chinese Yuan, 50–60% reduction compared to 2010) [50]. Hence the development benefits greatly improved. The US shale gas revolution has successfully reversed its domestic energy pattern and also the world energy situation [1]. In China, market demand for gas has kept rising rapidly during the past few years. The apparent consumption of natural gas in 2013 amounted to 1676*108m3, with external dependence up to 31.6% [1]. China shale gas development is in its infancy, and the shale gas production was only 13*108m3 in 2014 [50]. Currently, it takes 75–85 Chinese Yuan (CNY) to drill a horizontal well [51]. Nevertheless, shale gas development in China still has a broad market prospect. According to the forecasting from the MLR (Resources of the People's Republic of China), China's shale gas production will reach 100*108m3 in 2017, and 800*108m3 in 2020 [1]. In other words, shale gas will contribute 22% of China's natural gas consumption in 2020. (2) Environmental impacts. Environmental impacts include five indicators, i.e., water occupation, water contamination, air contamination, carbon emission effect, and other external environmental costs. ①Carbon emission impact here is the carbon reduction caused by the use of shale gas products. Shale gas is mainly composed of methane, and without hydrogen sulfide. Therefore, its quality is superior to that of natural gas from other sources. To obtain the same calories, the use of shale gas can achieve a 40% reduction in emission [5]. The ratio in ash content, SO2 and NOx of shale gas to coal is 1:148, 1:2700 and 1:29 [18]. According to the IEA report of 2013, in the US, energy-related CO2 emissions from 2008 to 2012 were reduced by 730 million metric tons, which marked the greatest reduction in carbon emissions among the surveyed regions [52]. Thus, further considering external costs could make shale gas more competitive [18]. ②Water occupation. Hydraulic fracturing as the most promis-

2.2. Interview and data Data of China's shale gas development and the institutions that govern them are limited. The realization of an evaluation indicator system with standard values and the prioritization of indicators need to be supported by field surveys and interviews with experts. This study includes a three-stage data and information collection effort. The first stage involves nine interviews with experts and a field survey, conducted in October and November 2013. The authors interviewed experts from China National Petroleum Corporation (CNPC), Chinese Academy of Science and Technology for Development (CASTD), Huadian Group, and other departments (detailed in the references of these interviews). On the basis of the interviews, the initial evaluation indicator system and standard values are revised and the relative importance of indicators is obtained. After the 3rd China Shale Gas Conference (5.11.2013, Chongqing, China), we conducted a field survey in the demonstrative shale gas mining block at Changning-Weiyuan, Sichuan province. The second and the last stage of the survey, conducted in July 2014 and March 2015, respectively. These two surveys are continuations of the survey in 2013. We interviewed eight experts from Guodian Group, the Institute of Geographic Sciences and Natural Resources Research, Chinese Academy of Sciences (IGSNRR, CAS), the Institute of Geology and Geophysics, Chinese Academy of Sciences (IGG, CAS), and the Institute of Mineral Resource, Chinese Academy of Geological Sciences (IMR, CAGS) (detailed in the references of these interviews). Further supplemental data and information, especially environmental aspects and industrial policies, are obtained by these two surveys. (The concluded relative importance of indicators provided by 17 authoritative experts based on the data survey can be made available to expert reviewers if required). 2.3. Method of comprehensive evaluation 2.3.1. Establishment of evaluation indicator system and standard values On the ground of literature survey [43–47] [f, q, j, n, o, i], we selected 21 indicators. These indicators can be categorized into four groups: (1) market prospects, (2) environmental impacts, (3) conditions of resource & occurrence, and (4) conditions of extraction & utilization (see Table 2) [7,44,61] [f, i, j, q]. (1) Market prospects. Economic benefit is one of the key factors in shale gas development. Market prospects provide the final value of shale gas development, which include four indicators, i.e., market 3

4

Relatively Slight Relatively Slight Effectively reduced Relatively low 4-6 4-6 0.9-1.2；1.8-2. 1

Slight Slight Significantly reduced Low >6 >6 1.2-1.8

> 90 Stable 1800-2200

Mature Sufficient > 80 Plains High Optimal

Air contamination Carbon emission effect

Gas content / (m3⋅1−1) Organic matter abundance（TOC）/% Thermal maturity (Ro)/%

Effective thickness /m Tectonic conditions Deposit depth/m

Core technologies Water supply Geological survey extent/% Earth surface conditions Actual policy-support level Infrastructure

Relatively high Optimal

Relatively mature Relatively sufficient 70-80 Hills

60-90 Relatively stable 1000-1800； 2200-2500

15000-20000

13000-15000

Relatively exuberant 1.5-1.7；2.02.2 0.7-1.0 Relatively high

Water occupation （m3 /Well） Water contamination

Other external environmental costs

Worst （0-0.2）

50-70 Plateau, low mountains General Medium

Medium

Medium

600-1000； 2500-3000

30-60 Medium

0.6-0.9；2.13.0

2-4

2-4

General

General

General

General

20000-30000

1.1-1.5；2.22.5 1.0-1.5 General

General

Relatively low Inferior

30-50 Alpine

Insufficient

Immature

15-30 Relatively unstable 300-600； 3000-4500

0.5-0.6；3.04.0

1-2

1-2

Relatively high

Relatively severe Relatively severe Close to oil

30000-45000

0.8-1.1；2.53.0 1.5-2.0 Relatively low

Inactive

Low Worst

< 30 Gobi, desert

Scarce

Inferior

< 300； > 4500

< 15 Unstable

< 0.5； > 4

0.5-1.0

0.5-1.0

High

Close to coal

Severe

Severe

> 45000

> 2.0 Low

0.5-0.8; > 3.0

Sluggish

Relatively high Optimal

> 85 Simple, mainly plains

Sufficient

Temperate (average:15003500） Mature

40-50 Simple, elevated once

Overall relatively high（mainly5-10） Temperate:1.1-2.0

High（average: 3-6）

Relatively high

Significantly reduced

Relatively severe

Relatively severe

< 0.7 Relatively high (historical average) < 19000

0.7-0.9

Relatively exuberant

General Inferior

< 15 Complicated in the south

Overall scarce

Immature

Lower than appropriate range （average:1-3） Lower than appropriate range in Mesozoic & Cenozoic（mainly 1-5） High variation，higher than suitable range in marine facies ( > 2); Mesozoic & Cenozoic: lower than suitable range in continental facies ( < 1.3) 30-40 Paleozoic complicated, multiply transformed Beyond the appropriate range （average: 4000-6000）

General

General

Relatively Slight

Relatively Slight

20000-40000

> 2.0 Low

2.5

Exuberant

China

Note: 1) All indicator information represents the whole situation of the US and China, owing to the difficulties on detailed data acquisition. Although there exist regional disparities within the both countries, this paper only considers the international differences. 2) Parameter source（i.e., indicator information）of China mainly focuses on the average case of critical parameters in the main shale gas prospective area. In view of the slow exploration and development process and other factors, some values mainly refer to shale gas parameters in the Sichuan Basin pilot experimental area, where shale gas resources have been implemented for commercial development. We use the typical values of these parameters to represent the current overall situation in China with respect to shale gas.

Conditions of extraction & utilization

Conditions of resource & occurrence

Environmental impacts

1.7-2.0

Unit price (Civil)/（Yuan/m3） Unit cost /（Yuan/m3） Annual cash yield ratio < 0.7 High

Exuberant

Market demand

Market prospects

The comprehensive evaluation of shale gas development

Inferior （0.2-0.4）

US

Medium （0.4-0.6）

Optimal（0.81.0）

Suboptimal （0.6-0.8）

US vs. China

Standard values of evaluation indicators (Scores)

Indicator layer（P）

Criterion layer (C)

Target layer (A)

Table 2 Evaluation indicator system and standard value of shale gas development.

Y. Yang et al.

Renewable and Sustainable Energy Reviews (xxxx) xxxx–xxxx

Renewable and Sustainable Energy Reviews (xxxx) xxxx–xxxx

Y. Yang et al.

hydrocarbons in mud shale. Consequently, areas targeted for shale exploration in northern America mostly are regions with a TOC higher than 2%, or in some cases even above 4%. Shale tests conducted in the Sichuan Basin, which has high marine shale, also confirm a high-quality shale reservoir appearing in regions with high TOC [61]. ③Thermal maturity, also referred to as organic matter maturity (Ro), is an important forecast indicator of hydrocarbon generation potential in thermogenic shale reservoir when the TOC reaches a certain benchmark: the higher the maturity, the higher the shale gas production capacity. However, over-maturity will also reduce the residual hydrocarbon content, where Ro > 3.0% is the threshold. In general, when the degree of thermal evolution remains moderate (Ro=0.8–1.4%), the residual oil gas in mud shale is the strongest [45]. ④Effective thickness indicates the thickness of shale-containing organic matter. The thickness gives a significant meaning to the exploration of shale gas deposits because sufficient thickness provides the basic indication of a rich deposit [24]. ⑤Tectonic conditions. Tectonic movement is an indicator of the positive impact induced by the geological conformation movement to shale gas generation and aggregation, as well as to gas preservation [24,62]. Strong tectonic activity will cause the loss of shale gas through crevices, whereas a stable tectonic environment often contains higher density and production capacity of shale gas. ⑥Deposit depth determines the economic feasibility of exploratory technology, because the cost and technological requirements rise with the depth: the deeper the deposit, the higher the cost of horizontal drilling and reservoir fracturing required for exploring shale gas. Assuming a fixed threshold for the gas price and recovery efficiency, to ensure sufficient economic efficiency, it is important to evaluate the relationship between the deposit depth and gas content in selected regions, especially the exploration target [24]. (4) Conditions of extraction & utilization. This category includes six indicators, i.e., core technologies, water supply, geological survey extent, earth surface conditions, actual policy-support level, and infrastructure. ①Core technologies include the technology set of horizontal drilling with staged sectional fracturing, manual micro-seismic monitoring, and platform "factory" operation. As with typical unconventional gas reservoirs, shale gas resides in deep earth formations, requiring natural crevices and fracturing impact to acquire natural gas with commercial value to an extent that engineering technology and scale production become critical. ②Water supply remains an issue that impacts shale gas exploration. Many countries, especially China, constantly experiences water shortages and has an uneven distribution of water resources. Current exploratory efforts are concentrated in the Sichuan Basin and Yangtze River Basin. Fierce competition between shale gas extraction and other industries greatly emphasizes the intensive use of water resources. ③Geological survey extent. A geological survey includes applying geological theory through technological means to conduct objective geological work and to perform the study economically and efficiently, to understand the geological conditions and deposits of the target site. Lacking a comprehensive grasp of overall resources imposes a fundamental problem for China to further its commercialization of domestic shale gas development. ④Infrastructure includes natural gas pipelines, adaptive exploration technology set, facilities, equipment, and the coordination of downstream industry for shale gas development. Infrastructure condition has been a significant guarantee supporting the US success of shale gas development, especially its highly developed network. There exited extensive natural gas pipeline

ing technique for shale gas exploitation requires a large volume of fresh water [7,53]. The amount of water required during the hydraulic fracturing process depends on the characteristics of the shale gas and the fracturing operations. Typically, in the US, a horizontal well requires 2–5 million gallons of water (i.e., about 7.6–19 million liter, or 7600-19,000 m3) for shale gas extraction [7,53], mainly focused on the two stages of drilling and fracturing, of which fracturing accounts for 90% of the total water consumption. Comparatively, the water consumption of shale gas wells in China is much higher, at an average of about 20000–40000 m3 of water per well [7,53]. Certainly, such large volumes of water, high rate of withdrawals from the local surface or ground water sources has a significant impact on the local water system [7,54], particularly for China, where water resources are overall scarce and unevenly distributed. ③Water contamination. Water contamination means after a 60–70% loss, the water injected during the horizontal wellfracturing process is allowed to flow back onto the surface and empty into rivers again [40], worsening the spread of subterranean water contamination in its recycling process. Moreover, the hydraulic fracturing of horizontal drilling uses a large amount of water, sandy soil, and chemical reagents, thereby contaminating underground water, cropland, and rivers. Hu et al. (2013) [55] and Zhao et al. (2013) [5] demonstrated that water contamination is a serious challenge for shale gas extraction. ④Air contamination. Shale gas extraction also involves the discharge of toxic and corrosive byproducts (e.g., benzene, toluene, formaldehyde, and hydrogen sulfide) [13,53,56]. Meanwhile, the wastewater returning from the hydro-fracturing to the surface and rivers contains 650 kinds of chemical substances of which most are toxic and carcinogenic or non-purifying radioactive, causing severe air pollution worse than that caused by coal [40]. Additionally, it is worth mentioning that, although shale gas has been regarded as a promising energy source for emission mitigation, the effects of shale gas on climate change have become more complex and controversial when life cycle greenhouse gas emissions (“carbon footprint”) are counted [7,53,57], partly due to the uncertainty surrounding the extent of methane (an extremely powerful greenhouse gas) leakage [2,4,58]. ⑤Other external environmental costs. The large-scale commercial extraction of shale gas demands the continuous construction of well fields, and the quantity of well drilling is up to a hundred times of that of conventional natural gas drilling. Increased drilling will lead to land resource consumption, solid waste pollution, noise pollution, potential earthquakes [13], and other problems relating to ecological damage [4,53,59]. (3) Conditions of resource & occurrence. This category includes six indicators, i.e., gas content, organic matter abundance, thermal maturity, effective thickness, tectonic conditions, and deposit depth. ①Gas content. Gas content represents the most critical parameter of resource-reserve assessment, exploration, and commercial mining [46]. According to the reference index of designated regions of marine shale published by the United States Geological Survey, the effective thickness of shale with rich organic matter exceeds 15 m, with a total organic content (TOC) greater than 4%, a thermal maturity (Ro) greater than 1.1%, porosity greater than 4%, low water saturation, and appearing micro cracks [60]. However, regardless of the variation of other parameters, the gas content is always the most important factor affecting the shale gas production capacity. ② Organic matter abundance (TOC), along with Ro, is one of the elements that determine the richness of a shale gas deposit and production potential [46]. According to previous research [45], the TOC and gas production rate in most basin shale are positively correlated: the higher the TOC, the higher the concentration of 5

Renewable and Sustainable Energy Reviews (xxxx) xxxx–xxxx

Y. Yang et al.

development.

network before shale gas has become a major gas resource in the US, and this benefited from its open-access policy [6]. By contrast, there are less than 3*104 km of gas pipelines in China, compared to the 30*104 km of main pipe network [d, f, i. o, q].

2.3.3. Relative importance assignment and prioritization of indicators To obtain the relative importance of each indicator (the weight of each factor), we use the method of Delphi combined with AHP. The approach is to create a hierarchy according to associations of evaluation factors (Fig. 2). The inter-comparison of relative importance of evaluation indicators was conducted at the bottom layer and expressed quantitatively, in the multiple layers of the hierarchy, followed by the construction of a judgment matrix according to the quantitative value of the relative importance of these indicators [63]. In the judgment matrix, aij represents the relative importance indicator i to indicator j , whereas aji and aij are reciprocal. To enable comparisons to be made, we require a scale of numbers to indicate the times one indicator more important (or dominant) over another. For this, Saaty (2008) [63] used a 1–9 scale. The numbers of 1, 3, 5, 7, and 9, denote equal importance, weak importance, essential importance, demonstrated importance, and extreme importance, respectively; whereas 2, 4, 6, and 8 are used to compromise between the above values [30,63,64]. The judgment matrix obtained can be expressed as:

As the information showed in Table 2, the valuation indicator system contains three layers: the target layer (“The comprehensive evaluation of shale gas development”), the criterion layer, and the indicator layer. The criterion layer and the indicator layer respectively include 4 major-indicator categories and 21 sub-indicators. Specifically, indicators 1–4 (market demand, unit price, unit cost, and annual cash yield ratio), represent economic impacts; indicators 5–9 (water occupation, water contamination, air contamination, carbon emission effect, and other external environmental costs) represent environmental effect; indicators 10–15 (gas content, organic matter abundance, thermal maturity, effective thickness, tectonic conditions, and deposit depth.) represent resource basic conditions, and indicators 16–21 (core technologies, water supply, geological survey extent, earth surface conditions, actual policy-support level, and infrastructure) represent operability of resource extraction. Moreover, each standard value of the assessment indicators is given a range (optimal, score 0.8–1.0; suboptimal, score 0.6–0.8; medium, score 0.4–0.6; inferior, score 0.2–0.4; and worst, score 0–0.2), to allow the assessment of both the value range of shale gas of other countries and unique situations of shale gas development in China.

⎡ a11 a12 ⎢ a21 a22 A=⎢ ⋮ ⋮ ⎢⎣ a m1 a m 2

Next, we use MATLAB to iteratively calculate the maximum eigenvalue λ max of the judgment matrix A and obtain its corresponding eigenvector wi =(w1,w2 ,…,wn ). The eigenvector is the assessment factors of importance (a weight distribution). Finally, we perform a consistency test to identify any logical inconsistency in the weight judgment matrix of the assessment factors. The consistency ratio CR is calculated λ −n CI (n > 1), and RC (random conby using CR = RC . Where, CI = max n−1 sistency) is the random consistency index that can be obtained by consulting reference [65] (Table 23–1–1). When CR < 0.1, the consistency is considered acceptable. Based on the relative importance (here the weighted factors) achieved in the previous steps, we prioritize the indicators in descending order.

2.3.2. Data standardization Considering general differences in the unit, dimension, numerical size, and range of diversification among indicators, non-dimensional treatment of the indicator data is required. By doing so, can we reflect the relative merits of each indicator in the series. We separate the indicators into four types according to their characteristic features: ① Positive indicators, namely those indicator values that quantitatively indicate increased value when units are larger, such as gas content and effective thickness; ② Negative indicators, those indicator values that quantitatively indicate increased value when units are smaller, such as unit cost; ③ Intermediate value indicators, those indicator values closer to the intermediate value range are better, and those further from the intermediate value range are worse, such as deposit depth and thermal maturity; ④ Non-quantitative indicators, such as earth surface conditions and tectonic conditions. Among them, the positive and negative indicators are subjected to non-dimensional treatment with formulas (1), (2), and (3). As for the non-quantitative parameters, we assign values in the range 0–1, in accordance with the extent of their impact on the integrated value of shale gas development. For instance, an optimal earth surface condition evaluates 0.8–1.0, suboptimal 0.6–0.8, medium 0.4–0.6, inferior 0.2–0.4, and worst 0–0.2.

Ui (Xi ) =

Xi − Xmin Xmax − Xmin

(1)

Ui (Xi ) =

Xmax − Xi Xmax − Xmin

(2)

⎧ Xi − Xmin , X ≤ X ≤ X i z max min ⎪ Xz min − Xmin Ui (Xi ) = ⎨ X − X max i ⎪ , Xz max ≤ Xi ≤ Xmax ⎩ Xmax − Xz max

⋯ a1n ⎤ ⋯ a2n ⎥ ⋮ ⋮ ⎥ ⋯ amn ⎥⎦

2.3.4. Comprehensive evaluation This paper uses the evaluation method of single indicator quantization-multiple indicators integration, to perform a comprehensive evaluation of shale gas development in the US and China. The basic steps are as follows: (1) Single indicator quantization: We calculate each indicator value, including quantitative and qualitative indicators. Then, we use a linear weighted coupling method on the indicators which belong to the same criterion layer. As a result, we can obtain four comprehensive indicator values from the four criterion layers, with the calculation method shown in formula (4): m

Ui =

∑ Aij j =1

× Vij (4)

where, Vij denotes the value of the j-th indicator within the i-th criterion layer; Aij denotes the weight corresponding to the j-th indicator (previously mentioned); and Ui represents the comprehensive index value of the i-th criterion layer. (2) Multiple indicators integration: By means of the linear weighting method, we ultimately couple the above four comprehensive index values to the integrated value of shale gas development (refer to Formula (5)), as the key reference for the comprehensive evaluation and comparison of the US and China shale gas development. A higher integrated index value indicates a higher integrated value of one country's shale gas development.

(3)

where, Ui (Xi ) is the standardized data; Xi is the original data value; Xmax is the maximum value in the data series; Xmin is the minimum value in the data series; Xz max is the upper limit of the value range (maximum); Xz min is the lower limit of the value range (minimum). Normalized data types are all located in the range 0–1. Thus, through the normalization process, all the indicator data shows larger values for indicators with a larger impact, and smaller values with a smaller impact, during the comprehensive evaluation of shale gas 6

Renewable and Sustainable Energy Reviews (xxxx) xxxx–xxxx

Y. Yang et al.

U = Ai × Ui

(5)

Table 3 Weight and prioritization of indicators.

where U is the integrated index value of shale gas development; Ai is the weight corresponding to the indicator within the i-th criterion layer; Ui is the comprehensive index value of the i-th criterion layer. (3) Make the comparison of the integrated index value (U ) of shale gas development in the US and China. From formulas (4) and (5), we can find that the integrated index value (U ) of the evaluation unit is between 0 and 1. The higher or lower the value (U ), the greater or lesser the integrated value of shale gas development, i.e., the stronger or weaker the suitability of shale gas development.

Target layer (A)

The comprehensive evaluation of shale gas development

The calculated integrated value of each unit of shale gas development is used as the basis of the suitability level of each assessment unit. We then statistically analyze the distribution of unit scores. Based on the frequency histogram of the total scores in each unit, the ranges of each suitability level can be determined. The criteria for classification are as follows: [0–0.25] represents low suitability (unfavorable for extraction); [0.25–0.5] represents medium-lower suitability (further confirmation required for extraction); [0.5–0.75] represents medium suitability (acceptable but with caution); [0.75–1.0] represents high suitability (favorable for large-scale extraction).

Criterion layer (C)

Stratification

Weight

Sorting

Market prospects

Market demand Unit price (Civil)

0.2113 0.1277

1 2

(0.4473)

Unit cost Annual cash yield ratio

0.0759 0.0324

5 11

Environmental impacts (0.0953)

Water occupation Water contamination Air contamination Carbon emission effect Other external environmental costs

0.0149 0.0417

16 7

0.0209

13

0.0073

21

0.0104

19

Gas content Organic matter abundance Thermal maturity

0.0907 0.0406

4 9

0.0406

9

Effective thickness Tectonic conditions Deposit depth

0.0188

14

0.0133

17

0.0133

17

Core technologies Water supply Geological survey extent Earth surface conditions Actual policysupport level Infrastructure

0.0916 0.048 0.0317

3 6 12

0.0103

20

0.0415

8

0.0172

15

Conditions of resource & occurrence

3. Results analysis and discussion 3.1. Comprehensive evaluation

(0.2171)

3.1.1. Weight and prioritization of indicators The concluded weights calculated according to the above method are based on the relative importance of indicators given by 17 authoritative experts within China's resource-related fields, and are listed in Table 3. Table 3 indicates that the factors influencing the comprehensive evaluation of shale gas development have an unequal importance. Market prospects and conditions of extraction & utilization are two main aspects, in which factors such as market demand, cost, price, technology, gas content, water contamination/supply, and policy are dominant.

Indicator layer (P)

Conditions of extraction & utilization (0.2403)

Fig. 3 indicates that, among all the 21 indicators, the positive portion of the final score reflects the 16 indicators for which US values are higher than those of China. On the other hand, the negative portion of the final score reflects the 5 indicators for which US values are temporarily lower than those of China. Correspondingly, we mark them as positive and negative indicators, respectively. Figs. 4 and 5 show the contribution rate of US-China gap values on each positive indicator and each negative indicator, respectively, to obtain the sum of US-China gap values for the total positive indicators and total negative indicators. We find that indicators such as core technological conditions, unit cost, water supply, gas content, and geological survey extent among the positive indicators, and indicators such as market demand and unit price among the negative indicators significantly contribute to US-China gap values of the integrated value of shale gas development. Whereas indicators such as other external environmental costs, carbon emission effect, effective thickness, and water occupation exhibit comparatively weak contributions here.

3.1.2. Integrated value of shale gas development in the US and China We calculate the total score of each unit (see Table 4). The results reflect a considerable score gap between the integrated value of shale gas development in the US and China, i.e., 0.7180 and 0.5256 points, respectively, which are close to the respective upper and lower limits of the range of medium-upper suitability. Within these limits, in terms of the four major aspects (i.e., market prospects, environmental impact, conditions of resource & occurrence, and conditions of extraction & utilization), the US obtains scores of 0.3143, 0.0410, 0.1416, and 0.2212 points, respectively, whereas China scores 0.3155, 0.0569, 0.0677, and 0.0856 points, respectively. The scores in Table 4 indicate the greater commercial value and appropriate size of shale gas development in the US, whereas China barely attains the critical point of whether to implement shale gas development. It is difficult to achieve the large-scale exploitation of shale gas in a few years. After that, two situations are both likely to occur in China, namely sluggish growth and rapid development, thus shale gas development strategies would need to be very cautious. Considering the current state of shale gas development in the US and China, the scores are effectively in line with reality.

(1) Positive indicators 1) Typical indicators: US-China gap values in the (0.4–0.6] range. This category only contains one indicator, i.e., core technological conditions. The two countries attain a gap value of 0.0595 points for the single indicator, which constitutes 21.56% of the US-China gap values for total positive indicators (Fig. 4). Core technology appears to be the most significant contributor to the US-China shale gas development gap. The US has already formulated a set of advanced shale gas

3.2. Analysis of differences between the US and China 3.2.1. Sub-comparison based on indicator layer Based on the results in Table 3 and Table 4, we use a simple bar graph to illustrate US-China differences in the indicator scores, sorted by indicator weight (see Fig. 3). 7

Renewable and Sustainable Energy Reviews (xxxx) xxxx–xxxx

Y. Yang et al.

Table 4 Comparison of comprehensive scores of shale gas development in the US and China. US

China

Indicator score

Weighted score

Indicator score

Weighted score

Market prospects

Market demand Unit price (Civil) Unit cost Annual cash yield ratio

0.85 0.33 0.92 0.70

0.1796 0.0421 0.0698 0.0227

1.00 0.55 0.40 0.11

0.2113 0.0702 0.0304 0.0036

Environmental impacts

Water occupation Water contamination Air contamination Carbon emission effect Other external environmental costs

0.84 0.30 0.30 0.90 0.30

0.0125 0.0125 0.0063 0.0066 0.0031

0.54 0.65 0.65 0.40 0.50

0.0080 0.0271 0.0136 0.0029 0.0052

Conditions of resource & occurrence

Gas content Organic matter abundance Thermal maturity Effective thickness Tectonic conditions Deposit depth

0.47 0.74 0.85 0.62 0.90 0.81

0.0426 0.0300 0.0345 0.0117 0.0120 0.0108

0.18 0.26 0.67 0.40 0.20 0.26

0.0163 0.0106 0.0272 0.0075 0.0027 0.0035

Conditions of extraction & utilization

Core technologies Water supply Geological survey extent Earth surface conditions Actual policy-support level Infrastructure

1.00 1.00 0.85 0.90 0.70 0.95

0.0916 0.0480 0.0269 0.0093 0.0291 0.0163 0.7180

0.35 0.40 0.20 0.40 0.45 0.30

0.0321 0.0192 0.0063 0.0041 0.0187 0.0052 0.5256

Total

tively, with individual contribution rates shown in Fig. 4. Obviously, mature core technology along with favorable and plentiful geological work and sufficient water resources lead to low shale gas extraction cost in the US (about $3.40/MMBtu2 for the wellhead cost in 2014) (MMBtu=million British Thermal Units) [66]. In contrast, in China weak technology with complex geological structures, insufficient geological work, and the scarce overall water resources increase the extraction cost significantly (about $11.20/MMBtu2 for the wellhead cost in 2014) [66]. 3) General indicators: US-China gap values in the [0–0.2] range. This category includes eleven indicators, i.e., TOC, annual cash yield ratio, infrastructures, actual policy-support level, tectonic conditions, deposit depth, Ro, earth surface, water occupation, effective thickness, and carbon emission effect.

exploration technology systems available for adoption, thereby making the large-scale exploration of shale gas technologically and economically feasible, whereas China is still in its infancy in terms of shale gas development. The immaturity of adaptive core technology and high cost are fundamental dilemmas for general exploration and development. Some key technologies are patented by foreign enterprises. The bottleneck in core technology limits the production output per unit well and causes instability. The higher cost delays any large-scale commercial development. 2) Relatively typical indicators: US-China gap values in the (0.2– 0.4] range. This category includes four indicators, i.e., unit cost, water supply, gas content, and geological survey extent. For these four indicators, the two countries attain gap values of 0.0395, 0.0288, 0.0263, and 0.0206 points, respec-

Fig. 3. US-China comparison on each indicator score.

8

Renewable and Sustainable Energy Reviews (xxxx) xxxx–xxxx

Y. Yang et al.

Fig. 6. US-China gap values of shale gas development based on criterion layer.

to the huge difference in market participants and the length of time required for shale gas development, and the accumulated learning experience of the US.

Fig. 4. Contribution rate of US-China gap values of each positive indicator to the sum of US-China gap values on total positive indicators.

3.2.2. Comparative analysis based on criterion layer According to the sub-comparison based on indicator layer (in Section 3.2.1), we further calculate the US-China gap values for the four major indicators within the criterion layer (Fig. 6). We can easily find that these four indicators representing the US-China gap of comprehensive evaluation scores can also be divided into two types. They are positive indicators (including conditions of extraction & utilization and conditions of resource & occurrence) and negative indicators (environmental impacts and market prospects), of which the two positive indicators both appear to make a remarkable contribution to the US-China gap of comprehensive evaluation.

Fig. 5. Contribution rate of US-China gap values of each negative indicator to the sum of US-China gap values on total negative indicators.

For these eleven indicators, the two countries attain gap values of 0.0195, 0.0191, 0.0111, 0.0104, 0.0093, 0.0073, 0.0073, 0.0052, 0.0045, 0.0041, and 0.0037, respectively, with individual contribution rates as shown in Fig. 4. On the whole, these indicators have a salient feature, namely, the large US-China gap values for individual indicators developed into small gap values in the final evaluation, due to the relatively small proportion of the indicator weight. For instance, the natural gas pipeline network in the US is far superior to that in China; nevertheless, the ultimate gap appears to be less obvious. (2) Negative indicators 1) Relatively typical indicators: US-China gap values in the (0.2– 0.4] range. This category includes two indicators, i.e., market demand and unit price, for which the two countries attain gap values of 0.0317 and 0.0281 points, respectively, with individual contribution rates showed in Fig. 5. The characteristics of the two indicators appear to be: small US-China gap values of individual indicator developed into relatively large gap values in the final evaluation, due to the considerable proportion of the indicator weight. However, in reality, the status of market demand and unit price (civil) of shale gas development in China only appears slightly better than that in the US, (namely, the market demand for shale gas in China is extremely vigorous with a high civil price, whereas, the US is noted for a slightly less vigorous market demand with a low price). 2) General indicators: US-China gap values in the [0–0.2] range. This category includes three indicators, i.e., water contamination, air contamination, and other external environmental costs. For these three indicators, the two countries have gap values of 0.0146, 0.0073, and 0.0021 points, respectively, with individual contribution rates shown in Fig. 5.

(1) Positive indicators: conditions of extraction & utilization and conditions of resource & occurrence. The US-China gap values of the integrated value of shale gas development are obviously reflected in the above two indicators, in which the US is significantly ahead of China (i.e., gap values up to 0.13565 and 0.07386 points, respectively). Meanwhile, their contribution to the overall gap values appears conspicuous (i.e., the US-China gap is mainly reflected in the conditions of extraction & utilization and conditions of resource & occurrence). (2) Negative indicators: environmental impacts and market prospects. The US-China gap values based on environmental impact and market prospect are 0.01587 and 0.001205 points, respectively, and their contribution to the overall gap values appears to be slight. With respect to environmental safety, the score of the US is lower than that of China, whereas China's score for market prospects is currently slightly lower than that of the US. 3.3. Reasons for divergence in shale gas development A qualitative analysis of the comparison of US-China shale gas development, as well as a review of the available literature reveals a number of possible reasons for the differences between the two countries. Maybe it was simply the appropriate occasion, wonderful geographical conditions, and harmonious human factors that were ultimately responsible for creating the current great revolution of shale gas in the US, whereas in China, the situation is markedly different. 3.3.1. Energy structural and strategic reasons Since the end of the 20th century, the US has been increasingly inclined toward the use of clean natural gas, which amounted to a combined rate of 30.25% of the (total) domestic primary energy consumption in 2014, about 6.54% points over the average global consumption [67]. Meanwhile, America's energy strategy has also been changed to increase local supply and reduce imports. According to the

The US-China gap values for these three indicators are mainly due 9

Renewable and Sustainable Energy Reviews (xxxx) xxxx–xxxx

Y. Yang et al.

(especially with extensive folding and faulting), appears to be a great risk for shale gas extraction [6]. The overall complexity, fragmentation, and discontinuity of shale plate features in China, cause greater difficulties for shale gas exploration and extraction in China compared to the US, even under the same terrain conditions. For these reasons, China needs to drill more test wells, perform more well logs, and spend more time and investment. Within this context, coping with technical bottlenecks and water supply contradiction, coupled with a generally inadequate transport infrastructure, building up a national supply chain to support a shale gas energy market in China is proving much more difficult than in the US.

Annual Energy Outlook 2015, the EIA expects the United States to be a net natural gas exporter by 2017 [68]. As a result, driven by its own demand for natural gas, America's unconventional natural gas dominated by shale gas achieved continuous rapid development. In other words, the combined effect of a tendency toward clean energy and the development of a strategy favoring energy independence facilitated the US shale gas revolution, as an indispensable prerequisite. In contrast, in China's primary energy structure, coal accounted for a significant proportion of the long-term energy supply, along with a low proportion of oil and a negligible amount of accounted natural gas (e.g., in 2014, China's total primary energy consumption attained 2972.1 million tonnes oil equivalent, of which coal accounted for 66.03%, oil 17.51%, natural gas 5.62%, and other 10.85%) [67]. Although over the past decade, China's natural gas production increased rapidly, with proven reserves of resources also significantly increased, the increased proportion in the primary energy consumption structure was not obvious. More seriously, China's dependence on foreign oil is likely to rise from 51.2–70% (2008–2030) and from 5.8– 50% for natural gas over the same period [53]. The unstable political situations in Middle Eastern and African countries on which China heavily depends for energy imports, and the vulnerability of supply routes to ensure safe delivery, mean that China's energy security remains an open problem in the future [53,69]. In short, the energy structure and energy development strategy, which appears to hugely differ from those of the US, have to some extent limited the shale gas development in China, despite the considerable domestic demand for natural gas.

3.3.3. “Structural” and “innovative” reasons Differences between the economic systems of the US and China and their respective impacts on market dynamics probably largely explain the delay in the development of China's shale gas market compared to that of the US. This is also the reason most frequently cited by the experts who were interviewed in late 2013 and early 2015, the majority of whom pointed to a strong entrepreneurial culture in the US and an openness to a large number of small-and medium-sized oil & gas firms and business practices/ideas that were generally lacking in China due to its socialist past [b, d, f, g, i, m, n, q]. Although no reliable empirical data exists to quantitatively test this claim, it appears plausible that the oligopolistic structure of the oil & gas industry, which has been hampering the development of a sustainable private market through the crowding out of private sector involvement, is viewed by many experts in China as one of the major factors hindering the development of unconventional natural gas in this country [g, q]. According to this view, the oligopolistic structure precludes competition and potential investment by more firms. In other words, as implied, private ownership capable of facilitating land transfer or leasing appears to have been a driving force behind the shale gas revolution in the US. In contrast, the absence of private ownership and of participation and competition by private companies could hinder a revolution in the shale gas industry in China [53]. However, such a deficit in competitive entrepreneurial spirit is probably not due to an inherent difference in mentalities or preferences, as suggested by some interview partners [o, q], but rather the past economic structure and business climate in China. As mentioned in the literature [6], a competitive industry structure would not necessarily favor innovation more than a highly concentrated industry structure. Tian et al. (2014) [6] separated shale gas development into two stages (i.e., an innovation stage and a scaling-up stage), with the first presenting a much larger challenge than the latter. The fundamental differences between the oil and gas sectors and economic structure (social-economic system) of the US and China determine the destiny of the different routes the two countries have followed in the context of the development of the shale gas industry. A great number of private firms participated in the innovation stage of US shale gas development, despite which Mitchell Energy, which has the advantage of financial resources, technical capacity, and more critically, continued accumulation of exploration and production analog, played an overwhelming role in achieving success with the Barnett Shale, thereby jump-starting the US shale gas boom. Along with the private land and mineral rights ownership system, and a series of favorable incentive policies, the US successfully ushered in the shocking shale gas revolution. In China, however, shale gas exploitation, similar to the exploitation of other energy resources such as petroleum and natural gas in the country, is usually dominated by large state-run companies: China National Petroleum Corporation (CNPC), China Sinopec Group (Sinopec), China National Offshore Oil Corporation (CNOOC), and Shaanxi Yanchang Petroleum Group. Currently, these state-run companies control or own more than 80% of the shale gas resources [f]. These major NOCs are all vertically integrated, and they not only control the upstream sector of the oil and gas industry but also the oil

3.3.2. Geographic and geological reasons To begin with, the US and China are both large countries with vast territory, nevertheless, the overall geographic conditions of the former are far superior to those of the latter. There are stable geological structures and unique great plains in the US, whereas China's complex geological structure and topography results in less available area. Furthermore, although there is little difference in terms of land area between the US and China, the average population density in the US is much lower than that in China (at 35 compared to 145 people/km2 in 2014, according to the [70]. Then, the geology and resource conditions relating to shale gas in China are considerably less favorable than in the US (according to engineers) [16] [f]. In the US, the largest concentrations of shale gas are contained in the Northeast, where the Haynesville Shale and the Marcellus Shale are located [7]. Actually, the overall characteristics of the US shale gas are reflected by undeveloped geological faulting and folding, a relatively simple and gentle shale structure, a large continuous distribution of reservoirs, and moderate deposit depth (mostly 1000–3000 m). Simultaneously, the high TOC and moderate thermal maturity of shale gas makes US shale gas reserves highly suitable for of shale gas production, along with stable yields. More importantly, the favorable plain surface conditions and abundant water resources are obviously convenient for transportation, exploration and extraction, and equipment installation. In addition, the US has the largest and the most sound natural gas pipeline network system in the world, which reduces the initial investment in the extraction & utilization stage, cutting down the market risk, and as a result, shale gas production companies do not have too many concerns about gas transportation. In China, however, most shale basins are tectonically complex with numerous faults, and some are seismically active, which is not conducive to shale development [16]. Even more seriously, nearly half of shale gas reserves are located in the southern mountainous and hilly regions, with most shale reservoirs buried at a depth of 3500–6500 m, which leads to greatly increased cost and shale gas extraction difficulties. The southwestern quadrant of the Sichuan Basin is the shale gas play in China with the most economic potential based on its relatively favorable geology, water resources, existing pipelines, and access to major urban markets. However, its considerable structural complexity, 10

Renewable and Sustainable Energy Reviews (xxxx) xxxx–xxxx

Y. Yang et al.

Table 5 Comparison of policy support for the shale gas industry in the US and China. Policies

Specific contents

R & D policy

Government and enterprise R & D programs

Entry & exit policy

Investment entry and quit mechanism, management mechanism (land and mineral rights)

Fiscal policy

Tax concessions, subsidies, incentive pricing

Infrastructural policy

Network of pipelines

US vs. China US

China

The unconventional gas programs(including Eastern Gas Shale Project) initiated in 1975; Gas Research Institute (GRI) established in 1977; DOE; NETL; IGT; GTI;Other R & D programs Since 1970s, more and more pioneering private firms (particularly Mitchell) have tried to combine larger fracture designs, rigorous reservoir characterization, horizontal drilling, and lower cost approaches to hydraulic fracturing to make shale gas extraction economic; The private land and mineral rights ownership system; Sound supervision system Since 1978, a series of incentive pricing and tax credits (e. g., the Natural Gas Policy Act of 1978 provided wellhead prices deregulated for Deonian shale, the Crude Oil Windfall Profits Tax Act in 1980 provided tax credits) has spurred investment in and technology improvement

A national shale gas R & D center (part of CNPC) established in 2010; The National Basic Research Program of China (973 Program); Other major science and technology funding schemes Shale gas exploitation is usually dominated by four major NOCs (CNPC, Sinopec, CNOOC and Shaanxi Yanchang Petroleum Group), the rest poor resources opening to new entrants (with poor experience and weak financial capacity); Irrational mining rights management; Stateowned land ownership

The existing extensive gas network of pipelines; The pipeline open-access policy, which was implemented in the 1980s and early 1990s, mandates that interstate pipelines offer transportation services only, on a nondiscriminatory basis

The central government provides shale gas enterprise with subsidy of 0.4 CNY/m3 (2012–2015), 0.3 CNY/m3 (2016– 2018), 0.2 CNY/m3 (2019–2020); The Shale Gas Industry Policy in 2013 put forward reducing the charge of the mineral resources compensation fee and the mineral rights utilization fee for shale gas exploration enterprises; Natural gas pricing policy reform from 2012 Poor natural gas pipeline infrastructure; Very limited open access policy to existing natural gas pipelines resulting in nondiscriminatory service hard to implement in the short run

gas industry in China depends substantially on government support. Governmental behavior, such as establishing guaranteed standards and a regulatory system, is the foundation for sustainable development of shale gas. With this in mind, to fill in the gap with the US, some policy suggestions and strategies for China are proposed as followings.

and gas service sector and the oil and gas pipelines [6] [f]. As a result, under the restraint of highly concentrated land rights and mining rights, as well as complex geology, poor technologies, weak financial capacity and poor infrastructure, new entrants have little incentive to undertake such risky investment (i.e., to drill shale gas wells) in the short run. 3.3.4. Industrial policy reasons The Chinese government has taken a great active role in stimulating the development of shale gas; nonetheless, its actual policy efforts still remain inadequate. It is unreasonable to simply compare the Chinese incentive policies regarding shale gas industry (including industrial planning) with those adopted by the US government, mainly because most of those policies in China are directed toward the state-owned enterprises rather than private companies [53], as well as the poor strength of implementation. Examples are the plan for the development of shale gas in the 12th Five-Year-Plan, and the Shale Gas Industry Policy drafted by the National Energy Administration in 2013 [71]. In order to give a more persuasive explanation, we use a table to display the policies for shale gas development in the US and China (see Table 5) [7,59,72,73]. In more details, a series of policies from the above two countries are divided into four main aspects: R & D policy, entry & exit policy, fiscal policy, and infrastructural policy. From Table 5, we can find that, China has several noticeable disadvantages and weaknesses on the above four aspects of policies, compared to the US. They are mainly reflected on the following four points: first, lack of strengthened incentive policies, especially for R & D support; second, lack of sound investment mechanism; third, absence of effective supervision system; finally, short of stable infrastructure security [1]. These unfavorable factors seriously hinder the enthusiasm of investment subjects and the optimized allocation & utilization of shale gas resources. The compared information in Table 5 indicates, to some extent, there remains a long time for China to overcome the gap in the levels of policy support on the shale gas industry with the US.

4.1. Ascertaining the real resource situation timely It is suggested that the government, major domestic petroleum monopolies (such as CNPC, Sinopec and CNOOC), universities, and scientific research institutes should conduct an in-depth nation-wide geological survey work on the shale gas resource timely, which helps to ascertain the potential storage, abundance and physical parameters of shale gas resource. It is imperative to establish a detailed shale gas geology resource database to find out the shale gas enrichment regions (i.e., sweet spots) and edge favorable area. This database provides a basic condition for the exploration risk reduction, technology innovation and scale development of shale gas in China.

4.2. Strengthening the R & D support In recent years, the market outlook for China's commercial shale gas exploitation is not optimistic. Obviously, adaptive key technologies are the bottleneck to realize the considerable economic benefits in Chinese large-scale commercial exploitation. It is recommended that the administration in China should formulate a long-term strategy and strengthen the R & D support on technology research for shale gas extraction, rather than seeking quick success and instant benefits. A complete set of adaptive convenient, efficient, and environmentfriendly technical service system should be gradually established. Particular strategy should be focused on the most urgent core technologies, such as finding “sweet spots”, horizontal drilling & staged hydraulic fracturing, and downhole 2-D/3-D microseismic monitoring. These technology improvements can be implemented through technology introduction, independent innovation and innovation of cooperation with foreign oil companies.

4. Policy suggestions According to the above analysis, future development of the shale 11

Renewable and Sustainable Energy Reviews (xxxx) xxxx–xxxx

Y. Yang et al.

gas developing economy) and China (an economy with great shale gas potential), we compared the two. Furthermore, according to the gap values, we explored the major differences between shale gas development in the US and China, and the reasons for these. Finally, policy suggestions were proposed. We led to the following conclusions:

4.3. Scientific orientating the investment subject It is unrealistic for China to open the large-scale access of shale gas market to new entrants（mainly private enterprises）like the US, in the short run. On one hand, the capital scale, and resource technologies, professional supporting conditions of new entrants cannot compare with the major state-owned oil and gas enterprises. On the other hand, China's current industry regulation and industry technical standards (such as methane emission standards) still haven’t reached the designated position. Under the current circumstance, the new entrants are unable to fulfill the environmental requirements. Hence, it is recommended that the Chinese government persist in the development mode dominated by the major state-owned oil companies, supplemented by small and medium-sized enterprises. Meanwhile, the government needs to establish and improve the mineral rights market as soon as possible. The reasonable and smooth forward/ reverse flow of mineral rights, can further improve the process and efficiency of shale gas development.

(1) Market, technology, gas content, water contamination/supply, and policy are the key factors impacting the prospects of shale gas development. (2) The results reflect a large score gap between the integrated value of shale gas development in the US and China. The differences are obviously reflected in the conditions of extraction & utilization and conditions of resource & occurrence. (3) The reasons for those differences can be grouped under four headings: energy structural/strategic, geographic/geological, structural/innovative, and industrial policy. (4) To fill in the gap with the US, it is recommended that Chinese policy makers consider the policy suggestions listed in six aspects: real resource situation, R & D support, investment subject, government incentives, industrial standards & supervision system, and product optimized utilization.

4.4. Expanding the government incentives To achieve the smooth development in shale gas, it is necessary for Chinese policy makers to further expand the strength and breadth of government incentives. National policy support should be further intensified, especially on the implementation of the relevant preferential tax and subsidy policy. The government incentives could increase the price competitiveness of shale gas in the short term. In the long term, reasonable and independent pricing system for shale gas should be established.

This paper can facilitate industry participants, and policy makers to formulate clean energy policies in China and other countries. Furthermore, it has academic value in terms of enriching the comprehensive evaluation and strategy of shale gas development research systems. However, this study is still preliminary with some limitations. Firstly, the significant difference in shale gas development stages between the US and China imposes restraints on acquiring indicator values. In China, only current extraction progress is assessable, whereas in the US, over 80 years of history causes large data fluctuation in stages, thus we only use the historical average values. Secondly, due to the difficulties associated with data acquisition, the quantitative calculation methods of evaluation in this article remain to be further improved. This paper adopts a qualitative-quantitative approach combination in conducting fuzzy-AHP on partially available data. The method has the advantage of dealing with problems associated with structurally complicated and insufficient data, but it is easily affected by judgment randomness during the evaluation of exports and subjective view of incomprehensiveness. Further study on the evaluation of optimal mining rate, market potential, optimized utilization, and integrated cost (which includes external costs such as environmental and social costs) of shale gas development in China, can focus on some more scientific quantitative evaluating methods, such as the useful theoretical economics and real option model for the mining rate optimization, and the ROV (Real Option Value) method for the mine's in situ value evaluation, which were respectively proposed by Zhang and Kleit (2016) [74], and Zhang et al. (2015) [75]. Furthermore, this paper only uses selected key indicators, yet other factors, such as energy security and social cost, are excluded from this study. These factors may also affect the comprehensive evaluation of shale gas development, but, considering the infancy of shale gas development in China, and accordingly, the difficulties of data acquisition, an intensive discussion of these relationships is beyond the scope of this paper. Further research in consideration of these issues (such as relationship between shale gas development and energy security, relationship between shale gas development and carbon reduction, and comprehensive costs of shale gas development), would contribute to understanding the impact of shale gas development well. Meanwhile, policy modeling and pathway choice for the realization of large-scale commercial development targets of shale gas in China are valuable, and thus are also worthy of close research attention.

4.5. Improving industrial standards and supervision system Environmental protection is also one of important topics throughout the whole process of shale gas exploitation. To reduce the potential environmental risks, it is recommended that the government should build up relevant regulatory standards and industry guidelines. These standards and guidelines should focus on resource management (such as waste gas/water recycling, strict technical standards for emissions) and environmental degradation (such as reducing methane leakage and water/air contamination). The relevant departments should make efforts to improve the supervision system. 4.6. Promoting the economic and efficient utilization of shale gas The channels of shale gas product distribution and utilization will become another hot topic, once the commercial extraction has been realized. From the perspective of scale effect, it is appropriate for shale gas to enter the gas pipe network, which can be used for civil gas, power generation fuel and related chemical raw materials. However, China has poor natural gas pipeline network and downstream industry supporting for shale gas. We suggest that, on the one hand, the China government should strengthen the construction of nationwide basis natural gas pipeline network, especially tiny pipeline network. On the other, the combination of diversified utilization mode for shale gas should be encouraged. For instance, we can use some of the shale gas products for pipeline-network-based civil life, transportation, and industrial development; some for the LNG (Liquefied Natural Gas); and other for the CNG (Compressed Natural Gas) or distributed (power) generation. 5. Conclusions This article considered various factors and established a fuzzy-AHP comprehensiveevaluation model to attempt to quantify the integrated value assessment of shale gas development, based on previous research achievements. Then, taking the typical cases of the USA (a mature shale 12

Renewable and Sustainable Energy Reviews (xxxx) xxxx–xxxx

Y. Yang et al.

Acknowledgement [32]

This work was financially supported by the National Key Research and Development Program of China (No. 2016YFA0602800), and the National Natural Science Foundation of China (No. 41171110). The authors thank all the experts for being available for an interview and their valuable comments and suggestions. Thank all anonymous reviewers for their valuable comments and suggestions.

[33]

[34]

[35]

References [36] [1] Li YB, Li Y, Wang BQ, et al. The status quo review and suggested policies for shale gas development in China. Renew Sustain Energy Rev 2016;59:420–8. [2] Howarth RW, Santoro R, Ingraffea A. Methane and the greenhouse-gas footprint of natural gas from shale formations. Clim Change 2011;106(4):679–90. [3] Qiu ZJ, Deng ST. Strategic position of unconventional natural gas resources in China. Nat Gas Ind 2012;32(1):1–5. [4] Johnson C, Boersma T. Energy (in) security in Poland the case of shale gas. Energy Policy 2013;53(1):389–99. [5] Zhao XG, Kang JL, Lan B. Focus on the development of shale gas in China—based on SWOT analysis. Renew Sustain Energy Rev 2013;21(5):603–13. [6] Tian L, Wang ZM, Krupnick A, et al. Stimulating shale gas development in China: a comparison with the US experience. Energy Policy 2014;75:109–16. [7] Wang Q, Chen X, Jha AN, et al. Natural gas from shale formation–The evolution, evidences and challenges of shale gas revolution in United States. Renew Sustain Energy Rev 2014;30:1–28. [8] Song WH, Yao J, Li Y, et al. Apparent gas permeability in an organic-rich shale reservoir. Fuel 2016;181:973–84. [9] Parnell J, Brolly C, Spinks S, et al. Selenium enrichment in Carboniferous Shales, Britain and Ireland: problem or opportunity for shale gas extraction?. Appl Geochem 2016;66:82–7. [10] Geng JB, Ji Q, Fan Y. The impact of the North American shale gas revolution on regional natural gas markets: Evidence from the regime-switching model. Energy Policy 2016:167–78. [11] Arredondo-Ramírez K, Ponce-Ortega JM, El-Halwagi MM. Optimal planning and infrastructure development for shale gas production. Energy Convers Manag 2016:91–100. [12] Aruga K. The U.S. shale gas revolution and its effect on international gas markets. J Unconv Oil Gas Resour 2016;14:1–5. [13] Sovacool BK. Cornucopia or curse? Reviewing the costs and benefits of shale gas hydraulic fracturing (fracking). Renew Sustain Energy Rev 2014;37(3):249–64. [14] Yuan JH, Luo DK, Feng LY. A review of the technical and economic evaluation techniques for shale gas development. Appl Energy 2015;148:49–65. [15] Wang SL, Wu XS, Zhang W, et al. Progress and trend of global exploration and development for shale resources. China Min Mag 2016;25(2):7–11. [16] EIA (US Energy Information Administration). Technically Recoverable Shale Oil and Shale Gas Resources: An Assessment of 137 Shale Formations in 41 Countries Outside the United States; June, 2013. [17] Weber CL, Clavin C. Life cycle carbon footprint of shale gas: review of evidence and implications. Environ Sci Technol 2012;46(11):5688–95. [18] Zhao WZ, Dong DZ, Li JZ, et al. The resource potential and future status in natural gas development of shale gas in China. Eng Sci 2012;14(7):46–52. [19] Krupnick A, Wang ZG, Wang YS. Environmental risks of shale gas development in China. Energy Policy 2014;75:117–25. [20] Wan Z, Huang T, Craig B. Barriers to the development of China's shale gas industry. J Clean Prod 2014;84:818–23. [21] Guo MY, Xu Y, Chen YD. Catching environmental noncompliance in shale gas development in China and the United States. Resources Conservation & Recycling. Online available at: http://dx.doi.org/10.1016/j.resconrec. 2015.12.001 [accessed 06.06.16]; 2015. [22] Guo TL. Key geological issues and main controls on accumulation and enrichment of Chinese shale gas. Pet Explor Dev 2016;43(3):317–26. [23] Lee WJ, Sohn SY. Patent analysis to identify shale gas development in China and the United States. Energy Policy 2014;74:111–5. [24] Teng JW, Liu YS. An analysis of reservoir formation, potential productivity and environmental pollution effect of shale gas in China. Geol China 2013;40(1):1–30. [25] Cen K, Jiang X, Zhu YX, et al. The state of the art of the surface gathering and transportation technologies in US shale gas field and its enlightenment to China. Nat Gas Ind 2014;34(6):102–10. [26] Li JZ, LiDH , Dong DZ, et al. Comparison and enlightenment on formation condition and distribution characteristics of shale gas between China and U.S.. Eng Sci 2012;14(6):56–63. [27] Zhang K. Shale gas revolution: Impact to China's resources exploration strategy. Geol Resour 2013;22(4):259–63. [28] Singh H, Gupta MM, Meitzler T, et al. Real-life applications of fuzzy logic. Adv Fuzzy Syst 2013;2013. [29] Ezzabadi JH, Saryazdi MD, Mostafaeipour A. Implementing fuzzy logic and AHP into the EFQM model for performance improvement: a case study. Appl Soft Comput 2015;36:165–76. [30] Lai PL, Potter A, Beynon M. Evaluating the efficiency performance of airports using an integrated AHP/DEA-AR technique. Transp Policy 2015;42:75–85. [31] Salehi N, Sepanlou MG, Gorzin BJ. An evaluation of soil fertility using soil organic

[37] [38] [39]

[40] [41] [42] [43] [44] [45]

[46] [47] [48]

[49] [50] [51]

[52] [53]

[54] [55] [56] [57] [58] [59] [60]

[61] [62]

[63] [64] [65] [66]

[67]

13

carbon, potassium, phosphorus and salinity factors for rice cultivation by fuzzy logic and AHP techniques. Int J Agric Crop Sci 2013;5(19):2233–41. Bijanzadeh E, Mokarram M. The use of fuzzy-AHP methods to assess fertility classes for wheat and its relationship with soil salinity: east of Shiraz, Iran: a case study. Aust J Crop Sci 2013;7(11):1699–706. Mahendran P, Mohorty MBK, Saravanan S. A fuzzy AHP approach for selection of measuring instrument for engineering college selection. Appl Math Sci 2014;8(44):2149–61. Kengpol A, Rontlaong P, Tuominen M. A decision support System for selection of solar power plant locations by Applying fuzzy AHP and TOPSIS: an empirical study. J Softw Eng Appl 2013;6(9):470–81. Yang HL, Jin ZH, Yang HL, et al. A fuzzy AHP approach for the selection of partner suppliers. Acta Polym Sin 2002;1(4):509–14. Gupta MM. Fuzzy set theory and its applications. Fuzzy Sets Syst 1992;47(92):396–7. Iskander MG. Using the weighted max-min approach for stochastic fuzzy goal programming: a case of fuzzy weights. Appl Math Comput 2007;188(1):456–61. Deschrijver G, Kerre EE. On the relationship between some extensions of fuzzy set theory. Fuzzy Sets Syst 2003;133(2):227–35. Gao L, Hailu A. Ranking management strategies with complex outcomes: an AHPfuzzy evaluation of recreational fishing using an integrated agent-based model of a coral reef ecosystem. Environ Model Softw 2012;31(7):3–18. Lockwood M. Integrated value theory for natural areas. Ecol Econ 1997;20(1):83–93. Krohling RA, Souza TTMD. Combining prospect theory and fuzzy numbers to multi-criteria decision making. Expert Syst Appl 2012;39(13):11487–93. LI H, Dong L, Duan HX. On comprehensive evaluation and optimization of renewable energy development in China. Resour Sci 2011;33(3):431–40. Li WG, Yang SL, Wang ZZ. Shale gas development evaluation model based on the fuzzy optimization analysis. J China Coal Soc 2013;38(2):264–70. Zhang JC, Jin ZJ, Yuan MS. Reservoiring mechanism of shale gas and its distribution. Nat Gas Ind 2004;24(7):15–8. Jiang FJ, Pang XQ, Ouyang XC, et al. The main progress and problems of shale gas study and the potential prediction of shale gas exploration. Earth Sci Front 2012;19(2):198–211. Yu BS. Particularity of shale gas reservoir and its evaluation. Earth Sci Front 2012;19(3):252–8. Yang Y, Wang LM, Fang YB. Feasibility evaluation for exploitation and utilization of China shale gas resources. J Nat Resour 2014;29(12):2127–36. EIA (US Energy Information Administration). Annual Energy Outlook 2012. Washington, D.C.: U.S. Department of Energy, 2012. 〈http://www.eia.gov/ forecasts/aeo/pdf/0383〉 (2012). Pdf [accessed 06.07.15] EIA. U.S. shale-gas production in the United States; 2015. Online available at: 〈https://www.eia.gov/dnav/ng/ng_prod_shalegas_s1_a.htm〉 [accessed 06.05.16] Dong DZ, Wang YM, Li XJ, et al. Breakthrough and prospect of shale gas exploration and development in China. Nat Gas Ind 2016;36(1):19–32. EIA. Shale gas development in China aided by government investment and decreasing well cost; 2015. Online available at: 〈http://www.eia.gov/ todayinenergy/detail.cfm?Id=23152〉[accessed 06.05.16] EIA. U.S. Energy-Related Carbon Dioxide Emissions; 2013. Online available at: 〈http://www.eia.gov/todayinenergy/detail.cfm?Id=10691〉[accessed 08.07.15]. Ren JZ, Tan SY, Goodsite ME, et al. Sustainability, shale gas, and energy transition in China: assessing barriers and prioritizing strategic measures. Energy 2015;84:551–62. Vidic RD, Brantley SL, Vandenbossche JM, et al. Impact of shale gas development on regional water quality. Science 2013;340:826–36. Hu D, Xu S. Opportunity, challenges and policy choices for China on the development of shale gas. Energy Policy 2013;60:21–6. Gunningham N. A shale gas revolution for China?. Clim Policy 2014;14(2):302–20. Matthews HS, Hendrickson CT, Weber CL. The importance of carbon footprint estimation boundaries. Environ Sci Technol 2008;42(16):5839–42. Wigley TML. Coal to gas: the influence of methane leakage. Clim Change 2011;108:601–8. Yu SW. Evaluation of socioeconomic impacts on and risks for shale gas exploration in China. Energy Strategy Rev 2015;6:30–8. Montgomery SL, Jarvie DM, Bowker KA. Mississippian Barnett shale, Fort worth Basin, north-central Texas gas-shale play with multi-trillion cubic foot potential. AAPG Bull 2005;89(2):155–75. Zou CN, Dong DZ, Wang SJ. Geological characteristics and resource potential of shale gas in China. Pet Explor Dev 2010;37(6):641–53. Laughrey CD, Ruble TE, Lemmens H, et al. Black shale diageneis: insights from integrated high-definition analyses of post-mature marcellus formation rocks, Northeastern Pennsylvania. AAPG Annu Conv Exhib 2011;8:10–3. Saaty TL. Decision making with the analytic hierarchy process. Int J Serv Sci 2008;1(1):83–98. Saaty TL. Desicion making by the analytic hierarchy process: theory and applications. Eur J Oper Res 1990;48(1):9–26. Chen YG. Mathematical methods for geography: foundations and applications. Beijing: Science Publishing House; 2011. China Enterprise Confederation/China Enterprise Directors Association. The unit cost of shale gas in China is at least twice as high as the United States; 2014. Online available at: 〈http://www.cec-ceda.org.cn/xxy/view.php?A_id=8449〉 [accessed 17. 06.15]. BP. Statistical Review of World Energy; 2015. Online available at: 〈http://www.bp. com/en/global/corporate/about-bp/energy-economics/statistical-review-of-worldenergy.html〉 [accessed 25.07.15].

Renewable and Sustainable Energy Reviews (xxxx) xxxx–xxxx

Y. Yang et al.

MLR. Interview with Ke Chen of China Geological Survey, Ministry of Land and Resources of the People’s Republic of China (MLR), Beijing; 2013. CASTD, 2013 CASTD. Interview with Shuli Dong of Chinese Academy of Science and Technology forDevelopment (CASTD), Beijing; 2013. Bai, 2013 Bai P. Interview with Peng Bai of Gas Mineral Research and Development Center, Coal Geological Exploration Institute of Yunnan Province, Beijing; 2013. Li, 2013 Li YC. Interview with Yongchang Li of Zigong clean automobile industry association, Zigong; 2013. Guodian, 2014 Guodian. Interview with Wenliang Cao of China Guodian Corporation, Beijing; 2014. IGSNRR, 2014a IGSNRR CAS. Interview with Hanying Mao of the Institute of Geographic Sciences and Natural Resources Research, Chinese Academy of Sciences (IGSNRR, CAS), Beijing; 2014a. IGSNRR, 2014b IGSNRR CAS. Interview with Tao Pan of the Institute of Geographic Sciences and Natural Resources Research, Chinese Academy of Sciences (IGSNRR, CAS), Beijing; 2014b. IGSNRR, 2015a IGSNRR CAS. Interview with Lei Shen of the Institute of Geographic Sciences and Natural Resources Research, Chinese Academy of Sciences (IGSNRR, CAS), Beijing; 2015a. IGSNRR, 2015b IGSNRR CAS. Interview with Jianan Zhao of the Institute of Geographic Sciences and Natural Resources Research, Chinese Academy of Sciences; 2015b. IGSNRR, IGSNRR CAS), Beijing. IGSNRR, 2015c IGSNRR CAS. Interview with Shuai Zhong of the Institute of Geographic Sciences and Natural Resources Research, Chinese Academy of Sciences (IGSNRR, CAS), Beijing; 2015c. IGG, CAS, 2015 IGG, CAS. Interview with Ming Liu of the Institute of Geology and Geophysics, Chinese Academy of Sciences (IGG, CAS), Beijing; 2015. CAGS and Resource, 2015 CAGS IMR. Interview with Tianming Gao of the Institute of Mineral Resource Chinese. Academy of GeologicalSciences (IMR, CAGS), Beijing; 2015.

[68] EIA. Projections show U.S. becoming a net exporter of natural gas; 2015. Online available at: 〈http://www.eia.gov/todayinenergy/detail.cfm?Id=20992〉 [accessed 25.07.15]. [69] Zhang ZX. China's energy security, the Malacca dilemma and responses. Energy Policy 2011;39(12):7612–5. [70] World Bank. Population density (people per sq. km of land area); 2015.Online available at: 〈http://data.worldbank.org/indicator/EN.POP.DNST〉 [accessed 25. 06.15]. [71] China National Energy Administration. China’s first "shale gas industry policy" published: shale gas companies enjoy tax relief; 2013. Online available at: 〈http:// www.nea.gov.cn/2013-10/31/c_132847585.htm〉[accessed 25.06.15]. [72] Pan J, Hu J, An H. Policies for promoting the development of unconventional natural gas resources in China. Nat Gas Ind 2011;31(9):1–6. [73] Wu YN, Chen KF, Yang YS, et al. A system dynamics analysis of technology, cost and policy that affect the market competition of shale gas in China. Renew Sustain Energy Rev 2015;45:235–43. [74] Zhang KY, Kleit AN. Mining rate optimization considering the stockpiling: a theoretical economics and real option model. Resour Policy 2016;47:87–94. [75] Zhang KY, Nieto A, Kleit AN. The real option value of mining operations using mean-reverting commodity prices. Miner Econ 2015;28(1–2):11–22.

Interviews conducted in October 2013-March 2015 (cited as references) Li, 2013 Li WG. Interview with Wuguang Li of China University of Petroleum, Beijing (conducted by E-mail, 19 October 2013); 2013. CNPC, 2013a CNPC. Interview with Songtao Deng of China National Petroleum Corporation (CNPC), Beijing (conducted by E-mail, 23 October 2013); 2013a. CNPC, 2013b CNPC. Interview with Wenzhi Zhao of China National Petroleum Corporation (CNPC), Beijing (conducted by E-mail, 23 October 2013); 2013b. CNPC, 2013c CNPC. Interview with Tingchuan Tang of China National Petroleum Corporation (CNPC), Beijing; 2013c. Huadian, 2013 Huadian. Interview with Kun Yang of Oil & Gas Branch office of China HuadianEngineer (Group) CO., Ltd., Beijing; 2013. MLR, 2013

14