Journal of Cleaner Production 294 (2021) 126257

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Journal of Cleaner Production

journal homepage: www.elsevier.com/locate/jclepro

Shale gas: Will it become a new type of clean energy in China? d A

perspective of development potential
Jing Wei a, Hongmei Duan b, *, Qiang Yan c, d
a
School of Land Science and Technology, China University of Geosciences, 29 Xueyuan Road, Haidian District, Beijing, 100083, China
b
School of Geophysics and Information Technology, China University of Geosciences, 29 Xueyuan Road, Haidian District, Beijing, 100083, China
c
Research Center for Strategy of Global Mineral Resources, Chinese Academy of Geological Sciences, 26 Baiwanzhuang Street, Xicheng District, Beijing,
100037, China
d
Institute of Mineral Resources, Chinese Academy of Geological Sciences, 26 Baiwanzhuang Street, Xicheng District, Beijing, 100037, China

a r t i c l e i n f o a b s t r a c t

Article history: Shale gas, with its low carbon and green characteristics, has attracted a considerable amount of attention
Received 14 August 2020 in the development of global clean energy. Analyzing the development potential and prospects of shale
Received in revised form gas has great significance for strengthening energy security while reducing carbon emissions in China.
1 January 2021
Based on the current development status, this paper explores the exploitation potential of shale gas
Accepted 1 February 2021
Available online 8 February 2021
development in China from the five main aspects of Porter’s diamond model and proposes a future
development strategy. After careful analysis, several discoveries are made. First, the recoverable reserves
Handling editor: Dr Sandra Caeiro of shale gas in favorable areas in China have reached 2.18
104 billion cubic meters (bcm), but the
current proved rate of shale gas is only 4.79%, which indicates its vast development potential. Second,
Keywords: approximately 65% of China’s shale gas is deeper than 3500 m, while the current technology and
Clean energy equipment of exploration and development are not adapted to exploration and development schemes
Shale gas that target shale gas in deep horizons. Third, the urgent demand of China’s natural gas market (estimated
Development potentials to be 600 bcm by 2030) and the high degree of external dependence (45.3% in 2018) provide a reasonable
Porter’s diamond model
situation for the development of shale gas. Fourth, the development of supporting industries is relatively
China
mature, and major related enterprises have clear strategic goals and obvious market competitive ad-
vantages. Fifth, the government’s incentives for the shale gas industry are insufficient, especially in terms
of the intensity of financial subsidies and tax relief and the subsidy cycle. Sixth, corresponding strategies
need to be implemented to strengthen all the factors in the diamond model and seize the current
development chances to gain a positive interaction among them. After effective development, shale gas
could become a crucial hub for balancing future economic growth and eco-environmental protection in
China. Our study provides guidance for the government, policy makers, investors, and other stakeholders
to better understand China’s shale gas industry and formulate corresponding development strategies.
© 2021 Elsevier Ltd. All rights reserved.

1. Introduction sustainable development of human society (Wang et al., 2018).

Fossil fuel energy consumption, which is a major driver, pro-
motes the rapid development of the global industrial economy
(Musa et al., 2018). However, fossil fuel energy consumption also
causes severe global warming problems, which pose a threat to the
* Corresponding author. School of Geophysics and Information Technology China
University of Geosciences (Beijing), 29 Xueyuan Road, Haidian District, Beijing,
100083, China.
E-mail addresses: wj_cugb@163.com (J. Wei), duanhm@cugb.edu.cn (H. Duan),
cagsyq@163.com (Q. Yan).
Therefore, many countries are producing and using cleaner energy
to cope with environmental challenges and meet energy demands
(Sohag et al., 2019). Currently, the development of low-carbon and
green energy has become a major trend worldwide. Energy reform
with clean energy development as the main content is underway.
Compared with coal, natural gas is a relatively clean energy source
(Lin and Li, 2020), with the advantages of higher calorific value and
lower carbon emissions (EIA, 2019a). Natural gas assumes a sig-
nificant role from high-carbon energy to low-carbon energy
transformation and is a bridge for future low-carbon energy
development (Zou et al., 2018).

https://doi.org/10.1016/j.jclepro.2021.126257
0959-6526/© 2021 Elsevier Ltd. All rights reserved.
J. Wei, H. Duan and Q. Yan
Shale gas is an unconventional natural gas that exists in organic-
rich mud shale and its interlayer, mainly in the form of adsorption
or the free state. Composed of methane, shale gas is a clean and
efficient energy resource (Li et al., 2016). The production of shale
gas drives the world’s natural gas production growth (EIA, 2016).
Consequently, shale gas provides new opportunities for strength-
ening energy security while reducing carbon emissions (Wang and
Li, 2017). There are abundant shale gas resources in the world, and
the amount of technically recoverable resources of shale gas is
2.1
105 bcm (EIA, 2013). Shale gas is a global phenomenon (EIA,
2011b); it has been successfully commercially developed in the
US over the last century (Clarkson et al., 2016), which stimulates the
global exploration of shale gas resources. Although shale gas
exploration is controversial in some countries (Soeder, 2018), many
countries still explore (or consider to explore) its economic value,
such as Canada (Rivard et al., 2014), China (Wang and Li, 2017), the
UK (Hays et al., 2015), India (Negi et al., 2017), Spain (Costa et al.,
2018), Australia (Liu et al., 2018), etc. Many nations are either
producing shale gas on a small scale or in the early exploration
stage because of the desire to replicate the benefits of shale gas in
the US (Cooper et al., 2018).
China has the advantage of abundant shale gas resources.
Although the technically recoverable resources of shale gas have
reached nearly 3.16
104 bcm, which accounts for approximately
15% of the world’s total (EIA, 2013), its development is still in the
initial stage (Li et al., 2016). As the world’s largest natural gas
importer, China’s natural gas dependence on foreign countries is
increasing quickly and creating an urgent demand for natural gas
(Li et al., 2020a). The commercial exploitation and utilization and
sustainable development of shale gas can alleviate the contradic-
tion between the supply of natural gas and the demand of natural
gas, improve national energy security, and promote energy strategy
transformation (Wang and Li, 2019). This utilization and develop-
ment can also reduce the international pressure on China’s carbon
emission reduction (Zhang et al., 2017b). Therefore, the develop-
ment potential of shale gas has significance for China’s ecological
environment construction and energy security strategy.
While research on the development of China’s shale gas is
expanding, especially in the past decade, studies focus on the
development breakthrough and status quo (Dong et al., 2016a; Li
et al., 2016), geological characteristics and conditions (Fan et al.,
2020; Xu et al., 2019, 2020), exploration technologies (Dong et al.,
2016b; Yue et al., 2018), and industry policies (Li et al., 2016).
Regarding the development potential of shale gas, most studies
have only focused on a certain region or basin in China (Fan et al.,
2020; Hu et al., 2019). Few works have comprehensively and sys-
tematically analyzed the overall development of China’s shale gas
and judged its future development potential from the perspective
of industry development, which leaves a gap in this domain to be
filled. Based on this point, we attempt to 1) identify the key factors
that affect the development of shale gas by using Porter’s diamond
model and reveal its current development status, 2) probe the
future development potentials of these crucial factors (internal and
external elements) from horizontal and vertical perspectives, and
3) propose practical strategies for the future development of
China’s shale gas. Achieving these objectives will provide the gov-
ernment, policy makers, investors, and other stakeholders with
helpful information and useful guidance to better understand
China’s shale gas industry and formulate the corresponding
development strategies.
2. Methodology
Porter’s diamond model, which is the theoretical basis of in-
ternational competitiveness research, has been widely utilized to
2
Journal of Cleaner Production 294 (2021) 126257
analyze the competitive advantage of national industries, including
the photovoltaic power industry (Zhao et al., 2011), wind power
€
industry (Irfan et al., 2019), tourism industry (Ozer et al., 2012),
renewable energy industry (Fang et al., 2018), coal industry (Wu
et al., 2017) and natural gas industry (Zhang et al., 2014). The dia-
mond model also fully identifies the crucial factors that affect the
development and competitiveness of an industry (Irfan et al., 2019).
These factors comprise four major parts, i.e., factor condition, de-
mand condition, related and support departments; and firm
strategy, structure and rivalry, as well as two accessorial factors:
government and chance (Fig. 1) (Porter, 1990). The dynamic inte-
gration and interaction of the six factors form the competitive
advantage of the industry.
The diamond model is a dynamic analysis system; it compre-
hensively investigates the core factors (internal and external ele-
ments) that influence the competitiveness of a certain industry of a
country and the mutual influence among these factors. The
exploration and utilization of shale gas is a dynamic economic
development process that involves factors such as resources, en-
terprises, market, industry, government, etc. The exploration and
utilization are affected by the domestic and international envi-
ronment. These factors influence each other and have a constantly
changing degree of influence on industry development. Thus, Por-
ter’s diamond model is chosen to yield our analytical framework
from a novel angle. This paper attempts to analyze the key factors
(internal and external elements) that influence the competitive
advantage of the shale gas industry, which is a strategic emerging
industry in China, from horizontal and vertical aspects to judge its
future development potential and fill a gap in this domain.
Because the shale gas industry is still in the primary stage of
development in China, it needs the government’s various functions
to promote and guarantee the rapid development of the industry.
Therefore, in addition to the four main parts of the model, this
paper considers the government as the fifth main aspect and
combines the factor chance into the five major aspects for analysis.
The components and contents of the diamond model in this paper
are shown in Table 1.
3. Comprehensive analysis
3.1. Factor condition
3.1.1. Overall development
As early as the last century, there were some introductions and
related reports on shale gas, but it was not until the beginning of
this century that research on this new field began in China. Many
breakthroughs have been made in the exploration and develop-
ment of shale gas in China, especially in the past decade.
In 2011, the State Council approved shale gas as an “independent
mineral resource” (www.gov.cn, 2011), which indicates that the
potential value of shale gas was discovered. From 2009 to 2012, the
Ministry of Land and Resources of China carried out a “survey and
evaluation of national shale gas resource potential and optimum
areas choice” and evaluated the shale gas resource potential of 41
basins (or regions), 87 evaluation units and 57 gas-bearing shale
intervals in China; the results show that the geological resource of
shale gas in China is 1.34
105 bcm (excluding the Qinghai-Tibet
region), which is approximately twice that of conventional natu-
ral gas (CGS, 2015). In 2013, EIA assessed 137 shale formations in 41
countries outside the US. The technically recoverable resources of
shale gas in China have reached nearly 3.16
104 bcm, which ac-
counts for approximately 15% of the world’s total (EIA, 2013).
In 2014, the Fuling shale gas field entered the stage of com-
mercial development earlier than expected, which marked that
China has become the third country to realize the commercial
J. Wei, H. Duan and Q. Yan
Table 1
Component and content of the diamond model for the shale gas industry of China.
Components
Factor condition
Demand condition
Related and support industry
Firm strategy, structure and rivalry
Government
development of shale gas (Zou et al., 2016). This achievement is a
landmark in the process of shale gas development. Shale gas pro-
duction made a new historic breakthrough in 2018. Contempora-
neously, the Fuling shale gas field produced 6.02 bcm and sold 5.78
bcm of shale gas, ranking first in China (Gas.IN-EN.com, 2019a), and
daily gas production could meet the domestic gas demand of more
than 32 million households, which provides a strong guarantee for
the supply of natural gas in the central and eastern regions of China
(IN-EN.com, 2018). Despite this rapid development, shale gas in
China is still in the primary stage.
3.1.2. Resource potential
(1) Resource distribution
Shale gas resources in China are abundant, widely distributed
(Fig. 2), mainly located in nine basins, including Tarim, Junggar,
Songliao, Ordos and Turpan-Hami basins (Dong et al., 2016b), and
form the five shale gas major production regions of Fuling,
Changning, Weiyuan, Zhaotong and Yanchang (Zhai et al., 2018).
Forty-four shale gas exploration rights are set up in China, with a
total area of 14.4
104km2 (NEA, 2016). The recoverable shale gas
resources in favorable areas in China have reached 2.18
104 bcm,
ranking first in the world. However, the proved rate of shale gas is
only 4.79% (Ministry of Natural Resources, 2019), which indicates
the vast development potential of shale gas resources in China.
With the continuous development of shale gas, good gas mea-
surements have appeared in many areas, which shows great po-
tential for exploitation (Table 2). In particular, the amount of
recoverable resources of shale gas in the southern Yangtze River
basin exceeds that in Russia (8.07
103 bcm, ranking ninth glob-
ally) (EIA, 2013). The Fuling shale gas field in Chongqing has proven
geological reserves of 600.8 bcm, with a cumulative annual ca-
pacity of 10.5 bcm, which renders it the largest shale gas field
Journal of Cleaner Production 294 (2021) 126257
Fig. 1. Diamond model.
Contents
Overall development, resource potential (distribution and conditions), and technology level
Potential demand and prospects
Exploration and development industry, equipment manufacturing, and distribution industry
Large state-owned enterprises, generally competitive market
Incentive policies (resource survey and evaluation policies, development planning policies)
outside North America (Gas.IN-EN.com, 2019b). Until now, constant
major breakthroughs in exploration and resource evaluation have
been made, and it is believed that there will be future discoveries
related to favorable areas for shale gas exploration in China.
(2) Resource conditions
There are three types of shale gas in China: marine, transition-
phase, and terrestrial (Fig. 2). Marine shale has the most favor-
able reservoir-forming conditions (Cheng et al., 2017), and the
crucial evaluation area is located in southern China. Apart from the
commercialized development achieved in marine environments,
exploration of transition and terrestrial types has progressed
slowly. There exists, however, a better prospect (Zhai et al., 2018).
Seven shale gas blocks are selected to analyze the basic condi-
tions of shale gas in China (Table 3), among which the Sichuan Basin
is currently the most successful area and a major target for shale gas
exploitation and development (Yue et al., 2018). The resource
conditions, such as a relatively stable sedimentary horizon, large
distribution area, large sedimentary thickness and high organic
carbon content (different horizons have various contents), are
similar to those of the US shale gas basins (Pu, 2008). In 2018, most
of the shale gas production was derived from the Wufeng-
Longmaxi (WL) Formation in the Sichuan Basin, which has
entered commercial development (Chen et al., 2020b). However, as
the development technology for shale reservoirs deeper than
3500 m in the WL Formation is still in the early stage of exploration
(Dong et al., 2018), there is great uncertainty about the success of
commercial exploitation of shale gas with greater burial depth. In
addition, the conditions of accumulation and preservation of other
blocks, such as Junggar Basin (Du et al., 2018), Tarim Basin (Miao
et al., 2017), and Subei Basin (Zhang et al., 2017a), vary greatly,
with satisfactory development conditions and generation potential.
3
J. Wei, H. Duan and Q. Yan Journal of Cleaner Production 294 (2021) 126257

Fig. 2. Distribution of shale gas resources and prediction of favorable zones in China.
Source: (Dong et al., 2016b)

Table 2
Main discoveries of shale gas resources in recent years in China.

Location Discovery Source

3
Anhui Province The amount of shale gas geological resources is approximately 3.37
10 bcm, which is one of the five preferred areas of Ministry of Natural
shale gas in China. Resources (2014)
Shanxi Province The amount of shale gas resources in the favorable area of Shanxi is estimated to be 4.44
103 bcm. Ministry of Natural
Resources (2016)
Chongqing The amount of shale gas resource in Chongqing is 1.37
104 bcm, with 29 favorable areas and 5 target areas. Ministry of Natural
Municipality Resources (2017)
Yangtze River The most concentrated area of shale gas resources is located in the southern Yangtze River basin, with maximum Cai et al. (2018)
basin recoverable resources of 8.82
103 bcm.
3
Guizhou There are 26 shale gas enrichment areas in Guizhou province. The amount of geological resources is approximately 9.2
10 Yan (2018)
Province bcm, and that of recoverable resources is estimated to be 1.65
103 bcm.
Hunan Province Hunan province has identified shale gas resources of approximately 9.2
103 bcm, which accounts for approximately 7% of Ministry of Natural
the national resource reserves, ranking the 6th in China. Resources (2018)
Enshi Prefecture Six wells have been drilled by Huadian Huazhong Clean Energy Co., Ltd., and 11 wells have been drilled by Jianghan Oilfield (www.chyxx.com, 2018)
Branch of Sinopec Group in Enshi. Satisfactory gas measurements indicate a broad exploration prospect.
e The Upper Paleozoic marine facies in Yunnan, Guangxi and Guizhou are expected to be the next area of breakthroughs due to Zhai et al. (2018)
suitable conditions for shale gas formation.

3.1.3. Technology
The level of exploration and development technology is a crucial
factor for the shale gas industry. Furthermore, horizontal drilling
technology and hydraulic fracturing technology, which are the core
technical means of shale gas development, improve not only the
mining rate but also the ultimate recovery rate (Zhang and Yang,
2013). Horizontal wells are the key to achieving profits from
shale gas development (Yue et al., 2018). Compared with vertical
wells, the cost of horizontal wells is 2 times that of vertical wells,
but the estimated ultimate recovery is 3 times that of vertical wells
(Li et al., 2011). As a crucial technology, hydraulic fracturing is
widely employed in oil and gas wells to increase production. Both
technologies have made some progress and achievements (Fig. 3).
The exploration and development technology of shale gas has
great potential. Currently, the key exploration and mining tech-
nology and equipment that targets horizons shallower than 3500 m
have realized domestication (Dong et al., 2016b). Several inde-
pendently developed equipment types, such as a movable drilling
rig, the Model 3000 fracturing truck, and a drillable bridge plug,
have realized large-scale production and application (Li et al.,
2020b), which supports and promotes the improvement of the
core technical means. An increasing number of core and critical

4
J. Wei, H. Duan and Q. Yan Journal of Cleaner Production 294 (2021) 126257

Table 3
Basic situation of major shale gas blocks in China.

Basins Technically recoverable resources (m3) Average depth (m) Thermal maturity (Ro) (%) TOC range (wt.%)

Sichuan Basin 17.72
1012 2957e4023 2.50e3.20 3.0e4.0

Yangtze Platform 4.22
1012 3505e4023 2.90e3.20 3.0e3.2
Jianghan Basin 0.78
1012 1676e3999 0.85e2.25 2.0e6.6
Greater Subei 1.28
1012 1768e4481 1.15e1.45 1.1e2.1
Tarim Basin 6.11
1012 3289e4456 0.90e2.00 2.1e3.0
Junggar Basin 1.02
1012 3048e3505 0.85 4.0e5.0
Songliao Basin 0.44
1012 1676 0.90 4.0
Total 31.57
1012 e e e

Source (EIA, 2015b).

Note: Ro, TOC and depth data for the regions discussed in this paper are approximate or average ranges obtained by calculation based on EIA statistics, which may have certain
deviations.

Fig. 3. General development of horizontal well drilling and hydraulic fracturing in China.
Source: (Ding, 2017; Wang, 2013; Zhai et al., 2018)

technologies have been explored, such as 21 independent pro-
prietary technologies (www.sohu.com, 2017). Although the current
technology and equipment of exploration and development are not
adapted to the exploration and development for targeting shale gas
at deep horizons, with continuously high single-well costs (Dong
et al., 2016b), they are still being developed and improved contin-
uously. For instance, the Dongyeshen-1 well in China, which is the
first high-yield shale gas well that is buried deeper than 4200 m,
has successfully produced 3.1
105 bcm of gas flow per day
(www.sohu.com, 2019). The deepest shale gas well (well Zu-206,
buried depth of 6240 m) in China has been successfully fractured
(SINOPECNEWS.COM, 2019a). Some tooling products and materials
have also been produced (Zhai et al., 2018). In 2018, the shale gas
extraction system that was jointly developed by CRCC Yongji
Electric Machinery Co., Ltd. and Sinopec Jianghan No. 4 Machinery
Plant with an electric drive of 4500 horsepower was implemented,
and the successful fracturing operation was completed in the Fuling
field (www.sn.sgcc.com.cn, 2018). Following this development
trend, exploration and development technologies will continue to
mature.
In addition, the potential environmental risks and challenges of
horizontal well-drilling and hydraulic fracturing technology cannot
be disregarded. For example, the special chemical reagent injected
during the extraction process may contaminate local shallow and
underground water (Yu et al., 2018). In addition, other environ-
mental risks related to shale gas extraction involve air pollution,
noise pollution, threatened communities and ecosystems, climate
change, landslides, and earthquakes (Israel et al., 2015). These po-
tential environmental risks create difficulties and challenges in the
development of China’s shale gas, which deserves attention during
the exploitation process.

5
J. Wei, H. Duan and Q. Yan
3.2. Demand condition
The proportion of natural gas in China’s energy mix has grad-
ually increased (Fig. 4). However, the production of natural gas
cannot meet the growing consumption requirements. Consump-
tion in China showed a strong average growth rate of approxi-
mately 13.3% per year in the last twenty years, which is
approximately 1.7 times the average increase rate for the rest of the
world (7.7%) in the same period (IEA, 2019a). The gap between
natural gas production and consumption continues to expand
(Fig. 5), which contributes to a gradual increase in imports (Fig. 5).
With an increase in imports year by year, the dependence of natural
gas on foreign countries has been soaring (Fig. 5). Especially in
2018, external dependence rose to 45.3%, which caused China to
become the world’s largest natural gas importer (MOFCOM, 2019).
The demand of the natural gas market is urgent. It is estimated
that China’s natural gas demand will reach 600 bcm in 2030
(Research Center for Strategy of Global Mineral Resources, 2016). In
this context, expanding gas sources and boosting natural gas
Fig. 4. China’s energy production and consumption structure, 1998e2018.
Source: China Statistical Yearbook, 2019
6
Journal of Cleaner Production 294 (2021) 126257
production are crucial, which is the basis and catalyst for shale gas
development. The year 2014 marked a turning point in China’s
shale gas development, after which shale gas production rapidly
increased. China’s shale gas production exceeded 10 bcm in 2018
but only accounted for approximately 6.7% of the total natural gas
production, compared with approximately 73% in America (Zou
et al., 2020). However, China has the most potential for shale gas
supply growth and is expected to become the world’s second-
largest shale gas supplier after America (BP, 2014). Shale gas is
projected to account for more than 40% of the country’s total nat-
ural gas production by 2040 (EIA, 2016). Shale gas has gradually
become a key sector with broad prospects for the future increment
of gas reserves and output in China (Wang, 2018).
3.3. Related and support industry
Related and support industries represent the upstream,
midstream, and downstream related industries that stimulate the
competitiveness of the main industry in market competition (Wu
J. Wei, H. Duan and Q. Yan Journal of Cleaner Production 294 (2021) 126257

Fig. 5. Production-consumption gap of natural gas and changes in natural gas imports and external dependence in China, 2008e2018.
Source: BP Statistical Review of World Energy (2019) (68th edition); Public data collation

et al., 2017). The shale gas industry chain consists of three parts;
each part contains different types of industries (Fig. 6).
The related industries upstream of the industrial chain mainly
comprise exploration and development industries, and the related
industries midstream mainly comprise pipeline transportation in-
dustries. Both industries mainly consist of large state-owned en-
terprises with abundant funds, strong technical force, numerous
talents, complete service chain, strong comprehensiveness and
obvious market competitive advantages, as represented by China
National Petroleum Corporation (CNPC), Sinopec Group (Sinopec),
and China National Offshore Oil Corporation (CNOOC). The distri-
bution industry is the main related industry downstream of the
industrial chain, and urban gas is an important branch of this in-
dustry, including household gas and urban heat supply. China’s
urbanization process makes an increasing demand for urban gas,
which drives the strong development of gas companies such as
Beijing gas Refco Group Ltd. and Shenzhen Gas Group Co., Ltd.
Equipment manufacturing is a vital pillar industry in shale gas
exploration and development and pipeline transportation.
Research and development involve special devices for exploration,
well site measurement and control devices, chemical monitoring
devices, pipe parts and high-technology devices. The products
produced by leading enterprises, such as Yantai Jereh Oilfield Ser-
vices Group Co., Ltd. and Kingland Pipeline, are widely utilized in
China. Due to the chances of international cooperation, the level of
domestic equipment manufacturing related to exploration and
development has been greatly improved. Equipment
manufacturing products that are related to pipeline transportation
have been applied to international pipeline projects (Kingland
Pipeline, 2018); for instance, the China-Kazakhstan Natural Gas

Fig. 6. Shale gas industry chain and related industries in China.

7
J. Wei, H. Duan and Q. Yan
Pipeline Project (China Daily, 2010) and the Central Asia-China Gas
Pipeline Project (China.org.cn, 2007), which provide key support
for the large-scale development and transportation of shale gas in
China.
China is advancing the reform of the natural gas market. The
establishment of the National Petroleum and Natural Gas Pipe
Network Group Co., Ltd. (PipeChina) in 2019 marks a significant
step in the restructuring of China’s natural gas market (Li, 2019),
which also creates opportunities and challenges in the entire shale
gas industrial chain. After the establishment of PipeChina, more
market players upstream of the industrial chain will participate in
the exploration and development of shale gas, and more capital will
be obtained from private enterprises and foreign companies. The
establishment of PipeChina will also have an impact on the
downstream distribution market, such as changing the supply form
and layout of shale gas and intensifying competition in the
downstream market (Chen et al., 2020a). In addition, grid-
connected operation and management make midstream pipeline
transportation more systematic and standardized, which is
conducive to accelerating the construction of pipeline networks,
improving the efficiency of infrastructure operations, and pro-
moting the interconnection of pipeline networks and market
competition. The establishment of PipeChina gradually promotes
the transition of China’s shale gas market from the original mo-
nopoly market to a competitive market.
3.4. Firm strategy, structure and rivalry
Chinese gas resources are monopolized by a few large state-
owned enterprises, represented by CNPC and Sinopec, and small
and medium-sized enterprises account for a relatively small pro-
portion (Yunna and Yisheng, 2014). The strategy and structure of
enterprises will vary with changes in national conditions and in-
ternational forms. The current development is based on two
modes: central and local enterprise cooperation and foreign
cooperation of state-owned enterprises.
CNPC strengthens the fine management mode of natural gas
production and accelerates the production capacity construction of
the key gas areas. In 2018, natural gas output reached a record high
level, with 4.26 bcm of shale gas, which is an increase of 41.2% over
the output of the previous year. The company has orderly promoted
the production of the national shale gas demonstration areas of
Changning-Weiyuan and Zhaotong, implemented geological engi-
neering integration, and contributed to the transformation of a
national energy structure (CNPC, 2019). In terms of international
cooperation, the CNPC focuses on the development of new projects
along the “One Belt One Road” route and seizes opportunities for
international communication (for example, Shanghai Cooperation
Qingdao Summit and The Beijing Summit of the Forum on China-
Africa Cooperation) to sign several strategic agreements and ma-
jor cooperation projects. By the end of 2019, the CNPC implemented
29 foreign cooperative exploration and development contracts,
including the well-known foreign oil and gas companies Shell and
Total, which has improved the ability of transnational operation
and management (CNPC, 2020).
Sinopec focuses on deepening the reform of science and tech-
nology systems and mechanisms, accelerating research on key core
technologies, steadily advancing structural adjustment, and
enhancing the overall competitiveness of the industrial chain.
Sinopec discovered the Fuling shale gas field, which is the first
large-scale shale gas field in China; it completed an annual pro-
duction capacity of 10 bcm, as scheduled, in 2018 (Sinopec, 2019). In
terms of international cooperation, Sinopec signed cooperation
agreements with international companies (for example, NOVATEK
and ConocoPhillips) and achieved positive progress (Sinopec,
8
Journal of Cleaner Production 294 (2021) 126257
2020). In addition, Sinopec cooperated with the Chongqing gov-
ernment to establish Sinopec Chongqing Fuling Shale Gas Explo-
ration and Development Co., Ltd., Sinopec Chongqing Natural Gas
Pipeline Co., Ltd., and Sinopec Chongqing Fuling shale gas sales Co.,
Ltd. to promote the development of shale gas from the whole in-
dustrial chain.
The absolute advantage of large state-owned enterprises ren-
ders China’s shale gas market less competitive. However, with the
advancement of the natural gas market-oriented reform process in
recent years, such as the establishment of PipeChina, private and
foreign enterprises have continued to enter the market. The
diversification of market entities will further intensify market
competition (Chen et al., 2020a). China’s equipment manufacturing
enterprises have obvious competitive advantages in domestic and
international markets. In addition, the development of unconven-
tional natural gas resources in China involves four types: coalbed
methane, tight gas, shale gas and natural gas hydrates (Zheng et al.,
2018). With the exception of natural gas hydrates, that are in the
trial production stage and have few competitive advantages
(paper.people.com.cn, 2020a), the development of the other two
resources has relatively greater competitive advantages (Li et al.,
2020b), which creates greater competitive pressure to the devel-
opment of shale gas.
3.5. Government
China’s shale gas industry is still in the initial stage of devel-
opment and needs the government’s various functions to promote
and guarantee rapid development, such as control and manage-
ment, standardized guidance, market regulation, promotion of in-
ternational cooperation, and formulation of policies. In terms of the
development status of China’s shale gas industry, the formulation
of industrial incentive policies is crucial.
The continued implementation of incentive policies promoted
the pace of Chinese shale gas development (Fig. 7). Since shale gas
was listed as an independent mineral resource, various relevant
policies have been constantly issued. Resource survey and evalua-
tion policies can quickly and efficiently determine the resource
base, grasp the distribution characteristics of resources, and judge
the favorable areas for exploitation to lay a foundation for planning
shale gas development. The introduction of the first shale gas policy
indicates that the government will provide more financial support
for the development of shale gas. Financial subsidies and tax relief
are necessary means to stimulate the development of the industry
(Table 4). Their definiteness has triggered an upsurge of enterprise
development, increased development enthusiasm, and effectively
promoted the rapid expansion of shale gas.
Development planning policies, from a global perspective and
based on the actual situation of China, have formulated shale gas
development goals and tasks within the planning period and
identified the key development direction of shale gas. In addition to
the state (e.g., Shale Gas Development Plan (2016e2020)), some
provinces and cities have issued shale gas industry evaluations or
planning policies to promote the development of local shale gas,
such as Jiangxi Province (People’s Government of Jiangxi Province,
2015) and Chongqing (Gas.IN-EN.com, 2016). These development
planning policies are strategic, operable and forward-looking and
have an irreplaceable guiding role in the overall rapid development
of shale gas.
4. Discussion
4.1. Analysis of the potential development capacity
The diamond model expresses the internal and external factors
J. Wei, H. Duan and Q. Yan Journal of Cleaner Production 294 (2021) 126257

Fig. 7. Changes in shale gas production and major policies and memorabilia from 2012 to 2018.

Table 4
Main contents of major incentive policies.

Policy Contents Source

Shale Gas Industry Policy Imported self-use equipment (including technology imported with equipment) NEA (2013)
that cannot be produced domestically for exploration and development of shale
gas shall be exempted from customs duties.
Notice on Resource Tax Reduction for Shale Gas The shale gas resource tax (at the stipulated rate of 6%) will be reduced by 30% from State Taxation
April 1st, 2018 to March 31st, 2021. Administration
(2018)
Notice on the Financial Subsidy Policy for the Development and The central government should subsidize the exploitation enterprises. In addition, MOF (2012)
Utilization of Shale Gas [2012] the subsidy standard was 0.4 yuan/m3 from 2012 to 2015.
Notice on the Financial Subsidy Policy for the Development and The subsidy standard decreased in 2015, with 0.3 yuan/m3 from 2016 to 2018. MOF (2015)
Utilization of Shale Gas [2015]
Supplementary notice of on the Interim Measures for the Starting in 2019, subsidies will not be provided according to the quota standard, (www.gov.cn,
Administration of Special Funds for Renewable Energy and the principles of “increasing subsidies by quantity rising” and “increasing 2019)
Development subsidies by winter” will be implemented.

that affect the competitiveness advantage of the domestic shale gas
industry. Internal factors consist of resource potential, demand
condition, related and support industries, and firm strategy,
structure and rivalry. The government, technology and chance are
the main external influencing factors of the shale gas industry.
China’s shale gas development has great potential and broad
prospects, with internal and external aspects.
4.1.1. Internal aspects
China has a tremendous quantity of shale gas resources, with
diversified types and wide distribution. However, the proved rate of
shale gas is quite low, with opportunity for enhancement.
Approximately 65% of China’s shale gas occurred deeper than
3500 m, which creates challenges for shale gas extraction, while
shale gas with a burial depth of less than 3500 m is mainly pro-
duced in North America (Dong et al., 2016b). The resource surface
conditions are more complex, which is not conducive to the
exploitation of shale gas (Table 5), but the basic conditions of shale
gas resources in major Chinese blocks still have certain advantages.
The Ro value of most shale gas in China is in the range of favorable
development zones, and the TOC indicates that most shale is the
source rock with potential (Guan et al., 2014). In addition, an
increasing number of potential areas of shale gas resources have
been discovered, which lay a resource foundation for increasing
production and driving large-scale commercial development in the
subsequent stage.
Global natural gas consumption is growing rapidly (BP, 2019).
China’s natural gas market is in short supply, with urgent demand
and a high degree of external dependence. All of these factors
provide an excellent situation for the development of shale gas. The
development of supporting industries is relatively mature, among
which the leading enterprises have strong competitive advantages
internationally. The products are widely employed in domestic
production and international cooperation projects. Major related
enterprises have abundant funds, numerous talents, strong
comprehensiveness and obvious market competitive advantages.
These enterprises seize the current chances to actively carry out
international cooperation projects, which promotes industrial
development, and adjust the objective and structure of the devel-
opment strategy according to changes in the external situation.
Although large state-owned enterprises still account for a large
proportion, the participation of small and medium-sized enter-
prises has opportunity for improvement in the future.

9
J. Wei, H. Duan and Q. Yan Journal of Cleaner Production 294 (2021) 126257

Table 5
Comparison of basic conditions of shale gas between America and China.

Conditions America China

Average depth (m) Marcellus 1219e2591 Sichuan Basin 2957e4023

Haynesville 3200e4115 Yangtze Platform 3505e4023
Fayetteville 305e2134 Greater Subei 1768e4481
Woodford 1524e2896 Tarim Basin 3289e4456
Barnett Approximately 2286 Junggar Basin 3048e3505
TOC range (wt.%) Marcellus 12 Sichuan Basin 3.0e4.0
Haynesville 2.25 Yangtze Platform 3.0e3.2
Fayetteville 6.9 Greater Subei 1.1e2.1
Woodford 4e6.5 Tarim Basin 2.1e3.0
Barnett 4.5 Junggar Basin 4.0e5.0
Thermal maturity (Ro) (%) Marcellus 0.8e3.0 Sichuan Basin 2.5e3.2
Haynesville 1.7e2.5 Yangtze Platform 2.9e3.2
Fayetteville 1.5e4.0 Greater Subei 1.15e1.45
Woodford 1.1e3.0 Tarim Basin 0.9e2.0
Barnett 0.7e3.0 Junggar Basin 0.85
Surface conditions Mainly plain Mainly hills or mountains
Proved Reserves (bcm) 9688.2 Approximately 1785
Production (2018) (bcm) 6245 10.9

Source (EIA, 2011a; 2019b; Guan et al., 2014; paper.people.com.cn, 2020b).

Note: 1. Five well-known shale gas blocks are selected to represent the conditions of shale gas in the US, and a corresponding number of Chinese shale gas resource regions are
selected based on the amount of technically recoverable resources. 2. Data of proved reserves are the latest released data. Data of the US are released in 2019, while those of
China are calculated based on the published data in 2020.

4.1.2. External aspects (2) Government

(1) Technology
The mature application of fracturing stimulation technology is
the key to the successful development of shale gas in America (Cui,
2010). In China, although the core technology has not been
nationalized completely, efforts are underway. Although simulta-
neous fracturing is not applicable for the current exploration status
due to its high cost and complicated procedure, the first successful
fracturing has been completed in China (SINOPECNEWS.COM,
2019b). Based on the current development trend, the application
of various fracturing technologies (Table 6) will gradually mature in
China in the future. Currently, increasing chances are beneficial to
the development of shale gas exploration technologies, such as
“One Belt One Road” and international exchanges and cooperation.
The burial depth and exploration technology of shale gas are
closely related to the development cost. Although the cost of shale
gas extraction in China has substantially decreased (Chen et al.,
2020b), it is still much higher than that in the US due to geolog-
ical conditions and technical shortages, which has affected the
economic benefits of its development. In addition, note that hy-
draulic fracturing will cause water concerns (Soeder, 2018), both
water supply and water quality. Because hydraulic fracturing needs
to consume many water resources and as a water-scarce country,
China’s water use for shale gas exploitation is generally higher than
that of other countries (Wang et al., 2018), which is not conducive
to the upgrading of exploration technology and should be fully
considered in the subsequent stage.
Producing shale gas efficiently and economically has been
supplemented with continued government investment in the
development of shale gas in China (EIA, 2015a). Especially in the
initial stage, China’s shale gas needs the government’s incentive
policies to help it survive the period of difficult exploratory, but the
current capacity in this part is insufficient. Although many relevant
planning and support policies have been issued, the intensity of
financial subsidies and tax relief is much weaker than that of the US
(Wang et al., 2016). The subsidy intensity gradually decreases. En-
terprises that have not entered the production stage are unable to
obtain financial subsidies. These factors reduce the enthusiasm of
enterprises in developing shale gas to some extent, which is a
restrictive factor for the development of shale gas.
Moreover, the sources of financial subsidies in the US, including
federal and state subsidies, are extensive. In China, subsidies are
mainly issued from the central government. Central-local planning
docking has not been achieved. The implementation effect also
needs to be verified. With an increasing emphasis on shale gas,
there is a large enhanced space to improve the capability of this
part, which is a practical and effective method to promote future
commercial development of shale gas in China.
4.2. Implications for shale gas development
4.2.1. Implications for the necessity of development
Through the shale gas revolution, the landscape of global energy
has been altered significantly (IEA, 2019b). Although the

Table 6
Application of various fracturing methods in present stage in China.

Modes Usage

Multistage fracturing
Repeated fracturing and water
fracturing
Hydraulic jet fracturing
Simultaneous fracturing
It has advantages and many applications. Conventional oil and gas multistage fracturing can provide experience for reference.
There are phased studies and applications. Each means has advantages, which will continue to be improved in the future.
It started late with immature application and high cost. In addition, it is in the research stage, which needs to be further improved.
Although the first successful fracturing has been achieved, it still needs further study and practical application for the current
exploration status.

10
J. Wei, H. Duan and Q. Yan
development of shale gas is controversial (Soeder, 2018) because of
the environmental risks of horizontal drilling and hydraulic frac-
turing (Wang et al., 2018), the economic value of its development
and the important impact on the structure and landscape of energy
supply changes cannot be disregarded.
Shale gas improves energy self-sufficiency in the US. From 2008
to 2018, the percentage of shale gas supply in the US dry natural gas
supply increased from 14.2% to 77.0% (EIA, 2020a). America
contributed 45% of global natural gas output growth in 2018,
mainly from shale gas in the Marcellus, Hainesville and Permian
basins (BP, 2019), which confirms the impact of the shale gas rev-
olution. America has been able to achieve natural gas self-
sufficiency or even exportation to foreign countries since 2017
(EIA, 2020b).
China has been the world’s largest natural gas importer since
2018, with continuously rising natural gas demand. However, China
is rich in shale gas resources, and accelerating the exploitation and
utilization of shale gas is a significant means to alleviate the
shortage of natural gas supply and limit growth in natural gas
imports. Based on the estimated natural gas consumption of 320
bcm in 2020, the proportion of shale gas consumption will reach
9.3%, which is expected to become a crucial guarantee for China’s
energy security (paper.people.com.cn, 2019). Therefore, the effi-
cient exploitation and realization of the economic value of shale gas
is a new orientation for promoting the development of clean energy
in China.
4.2.2. Implications for the strategic exploitation of shale gas
A practical exploitation strategy is needed to promote the
transition of shale gas from technically recoverable evaluation re-
sources to economically recoverable output resources (Fig. 8).
Although some natural unfavorable shale gas geological resource
conditions cannot be changed, they can be improved by constantly
updating the understanding of existing effective resource endow-
ment. Moreover, carrying out the real-time evaluation of the shale
gas resource potential, establishing a basic resource condition
parameter sharing platform, and sharing and updating shale gas
Fig. 8. Conceptual framework of shale gas development strategy.
11
Journal of Cleaner Production 294 (2021) 126257
data information in a timely manner are foundations for subse-
quent development work.
Although China is the third country to master shale gas explo-
ration and development technology (Fan et al., 2020), the tech-
nology for the exploration of shale gas reservoirs that are buried
deeper than 3500 m is still in the exploratory stage. In the future,
the rapid growth of gas production will be greatly affected by
technology breakthroughs for deep shale gas development.
Therefore, it is an inevitable trend to strengthen international ex-
changes and cooperation, bolster technological research and
development, and promote the process of technology nationaliza-
tion. Compared with state-owned enterprises, the shale gas
exploration and development technology of small- and medium-
sized enterprises (including private enterprises) needs to be
improved. Moreover, the market needs diversified enterprises to
activate competition. The establishment of PipeChina marks the
advancement of market reforms, which still needs improvement. In
addition, the characteristics of the initial stage of shale gas devel-
opment should be fully considered in the process of formulating
incentive policies. The reduction of the financial support cycle and
financial intensity and the termination of financial support from
the government will create difficulties and challenges for China’s
shale gas commercial development. Thus, measures such as
increasing the intensity of financial subsidies and tax relief,
extending the subsidy cycle, and improving the tax system should
be considered. Moreover, shale gas development requires the
support of other incentives, such as a diversified industry special
fund and various financial investments. It is also crucial to grasp the
current international and domestic development opportunities and
follow the path of shale gas development with Chinese
characteristics.
The next ten years will be prime time for shale gas development
in China. In 2018, global natural gas consumption increased by 5.3%,
which was among the fastest growth rates in the past three decades
(BP, 2019). The strong global demand for natural gas provides a
reasonable situation for the development of shale gas. The new
normal for economic development provides strategic opportunities
J. Wei, H. Duan and Q. Yan
for the large-scale development of shale gas, while vigorously
developing shale gas also conforms to the general trend of energy
development in China. “The Belt and Road Initiative” has increased
international exchanges and cooperation and created new oppor-
tunities for its development. In addition, changes in international
and domestic political and economic forms have created opportu-
nities and challenges for China’s shale gas industry. It is necessary
to correctly grasp the positive and negative effects of this backdrop
on industry development. If the potential development capability
can be enhanced and the development strategy can be realized, it is
expected that in the next two decades, shale gas will become a key
quality assurance of natural gas in China and a crucial hub for
balancing economic growth and eco-environmental protection.
Achieving these will be conducive to the promotion of ecological
environment construction and the development of supply-side
reform in China, which has significance to the energy strategy. As
a new force of clean energy, shale gas is likely to develop into an
important pillar of China’s energy in the short or medium term.
5. Conclusions
This study selected Porter’s diamond model to explore the po-
tential development capacity of the shale gas industry in China
from five key aspects. Our study indicates that China’s shale gas
industry has great development potential with broad prospects.
With continuous breakthroughs in exploration, the number of
shale gas favorable areas in China has been increasing and lays the
foundation for subsequent development. Substantial progress has
been made in shale gas exploration and development technology.
Although the current technology and equipment of exploration and
development are not adapted to the exploration and development
that targets shale gas at deep horizons (3500 m), efforts are un-
derway. The urgent demand of China’s natural gas market and high
degree of external dependence provide an excellent situation for
the development of shale gas. The development of supporting in-
dustries is relatively mature, and major related enterprises have
clear strategic goals and obvious market competitive advantages. In
addition, the role of government is crucial in this process. China’s
shale gas needs government investment to help it survive the
period of difficult exploration, but the current capacity in this part
needs improvement, especially in terms of the intensity of financial
subsidies and tax relief and the subsidy cycle. The potential envi-
ronmental risks, less competitive market, and changes in the in-
ternational and domestic political and economic forms also create
challenges to shale gas development. Thus, it is necessary to
strengthen all the factors in the diamond model and seize the
current development chances to gain a positive interaction among
them, such as establishing a basic resource condition parameter
sharing platform, strengthening technological research and devel-
opment, increasing the intensity of financial subsidies and tax re-
lief, extending the subsidy cycle, improving the tax system, and
promoting market reforms. Thus, as a new force of clean energy,
shale gas is likely to develop into a crucial pillar of China’s energy in
the future.
We fully acknowledge the limitations of our analysis in terms of
element selection. Other external development potentials, such as
transportation pipelines, special funds, and effective supervision of
shale gas, are worth discussing in future research. Although the
development of shale gas is controversial because of the environ-
mental risks during the exaction process, the economic value of its
development and the important impact on energy structure cannot
be disregarded. Shale gas is a kind of clean energy with strategic
value and a realistic choice for promoting the construction of a
beautiful China, which is essential to the clean and low carbon
energy transition and energy security in its future. Our study serves
12
Journal of Cleaner Production 294 (2021) 126257
as guidance for the government, policy makers, investors, and other
stakeholders to better understand China’s shale gas industry and
formulate corresponding development strategies.
CRediT authorship contribution statement
Jing Wei: Writing - original draft, Formal analysis. Hongmei
Duan: Conceptualization, Supervision. Qiang Yan: Resources, Data
curation.
Declaration of competing interest
The authors declare that they have no known competing
financial interests or personal relationships that could have
appeared to influence the work reported in this paper.
Acknowledgements
This work was supported by Geological and Mineral Survey and
Evaluation Project (No. DD20190652 and DD20160084). We thank
all of the reviewers for their valuable comments on this paper.
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