After entering April, urea prices in the Central Plains have been adjusted appropriately with the decrease of demand and the increase of supply. Recently, urea factory prices in Lianghe and other places have dropped below 2000 yuan (ton price, the same below). It is rumored that Shanxi’s low price transaction has dropped to a little higher than 1900 yuan, but the overall receiving prices in the Northwest, Southwest and Northeast regions are slightly higher than those in the earlier period. There has been an increase, such as the quotation of some factories in Xinjiang has been screamed to more than 1800 yuan, the export price of high-end brands in Yunnan has also been more than 2200 yuan, and the arrival price of Heilongjiang market has also risen to more than 2200 yuan. At present, the urea market demand around the Central Plains has come to an end, but the domestic demand in some regions still exists, and prices are staggered. The downstream traders also have some difficulties in purchasing urea: are they picking up or temporarily on the sidelines? The author discusses this issue with the industry and draws the following conclusions: urea still has a certain risk of slipping in the near future, and procurement still needs to be cautious, mainly in the following aspects:

Firstly, the overall operation of the enterprise is relatively high. Recently, with the gradual resumption of production of gas head urea enterprises, although some enterprises have also entered the state of overhaul, according to the statistics of China Chemical Fertilizer Network, the actual daily output of urea in China is still more than 150,000 tons, and some overhaul enterprises are about to resume production, while most large plants have no plan for overhaul, the overall supply pressure is gradually increasing, and some industries are expected to be around the end of April, urea Overall supply may exceed 160,000 tons, and historical data over the years show that when the overall production of urea exceeds 155,000 tons, the overall price is relatively likely to decline.

Secondly, the market demand is not urgent. Recent spring market orders are almost at the end. Although the summer fertilizer market mainly uses high nitrogen fertilizer, most downstream compound fertilizer plants are not in a hurry to purchase at present. On the one hand, there are still low-price orders to be issued in the early stage. Compound fertilizer enterprises are not short of stock in the short term. On the other hand, the current urea price is still on the high side. In order to avoid risks, some enterprises are still offering high prices. The urea industry only takes a stand-by attitude, waiting for the urea market to stabilize; and the export side is because the domestic price is relatively high, at least at this stage, the domestic urea export is temporarily hopeless, under the background of high start-up rate, urea price or there is a certain risk of decline.

In addition, the demand of plywood factories and recent markets in northeast, northwest and southwest can not last long. The agricultural market will end before May, and the demand of plywood factories is out of gear. Some industries are expected to be the most prosperous when the enterprises have completed the execution of the orders in arrears, the price will decline further.

In summary, recent urea demand reflects slightly. Although some factories have done enough to meet the tense demand atmosphere, the downstream market is still relatively small. It is expected that the overall price of urea in the near future is stable and weak, and there is still a certain downside risk.

Although the spot supply of PTA will turn loose after this round of equipment overhaul, the production cost will gradually rise under the influence of rising crude oil prices. Inventories of ethylene glycol in East China continue to rise, and the forward price of ethylene glycol is weaker than PTA when the spot price can cover the production cost. The spread between PTA and Ethylene Glycol 1909 is expected to continue to widen.

The explosion of Xiangshui Industrial Park in Suzhou has a great impact on the dye market. Under the influence of cost pressure, printing and dyeing enterprises began to reduce the purchase of upstream grey cloth. According to the data of grey cloth inventory of sample enterprises in Shengze area, the progress of grey cloth inventory of degraded grey cloth began to slow down at the beginning of March. The stock of grey cloth has risen from the recent low of 34 days to 35.5 days, and has not entered the rapid degrading stage as in the same period over the years. With the passage of time, the impact of the incident on the textile and chemical fibre industry has been conducting upward and downstream, and the production peak in September this year is expected to be significantly affected. The demand for PTA and ethylene glycol will continue to weaken in the second and third quarters.

Late March to mid-April is the first round of PTA equipment centralized maintenance time of this year. At the same time, under the condition of low inventory, PTA manufacturer’s intention to exert influence on market price by adjusting equipment maintenance gradually appears.

Recently, PTA social inventory began to flatten. According to the latest data, PTA social inventory is 2.5 days, at a normal level. With the end of the centralized overhaul period, the stock boost to PTA prices will gradually weaken. Relatively speaking, the inventory scale of ethylene glycol has been rising since it entered the storage phase in September, 2018. The latest inventory in East China has reached 1.16 million tons. Assuming that the output of polyester is 50 million tons in 2019, the corresponding consumption of ethylene glycol is 16.75 million tons. According to the degrading rate in 2014, it takes nearly three months for inventory to be degraded. Taking into account the current apparent consumption of 15 million tons per year, the process of ethylene glycol inventory degrading will be very long, and inventory pressure is much higher than PTA. Recently, crude oil prices have risen sharply, WTI has stabilized at $64 and Brent has broken through $70, which has significantly boosted the cost of chemical products. The price difference between crude oil and PX has continued to fall from the high level since the beginning of March, but with the weakening of PX price in March, the price difference between PX and PTA oscillates upwards, which is higher than the same period. Recent PTA processing fees have fallen. In the long run, it is expected that PTA profits will continue to transfer to PX, and the cost support for PTA prices will gradually increase. Although the loose spot supply will put pressure on PTA price after the maintenance period is over, the reduction of processing fee will gradually increase the support of cost to PTA price.

In the aspect of ethylene glycol, the price difference is not the same under each process. But overall, the profits of oil and gas ethylene glycol manufacturers are very thin. The price difference of naphtha route has approached zero axis, the price difference of ethylene route has remained near – 1100 yuan / ton, and the price difference of MTO route has weakened to – 1000 yuan / ton. In contrast, the full cost of coal-to-ethylene glycol is still lower than the spot price. According to the annual report data of listed companies producing ethylene glycol in 2017, the total cost of coal-based ethylene glycol is estimated to be around 4300 yuan/ton considering depreciation. If depreciation is not considered, the unit cost of coal-based ethylene glycol is even as low as 3500 yuan/ton. Relatively speaking, lower market prices are more conducive to these coal chemical enterprises to occupy the market. Considering the production cost of each route, the price support of ethylene glycol will remain weak in the second and third quarters.

In 2019, downstream polyester industry demand for raw materials is expected to weaken. Considering the trend of PTA and ethylene glycol inventory differentiation and the difference in cost-side support between them, the price gap between PTA and ethylene glycol will continue to widen until September. Technically, the spot price difference between the two is near the average value of nearly ten years, and there is a large space for the spread to expand. The opening of continuous trading makes the trading time of the two varieties coincide highly, which is more conducive to the operation of arbitrage trading. Overall, the profit margin of long PTA and ethylene glycol in 1909 contract is larger.

The price of potassium sulphate water salt is relatively low, Mannheim is stable and high; the current 50% water salt powder market trade transaction mainstream 2600-2650 yuan/ton, Mannheim 50% Fanjilu mainstream factory price 2750-2800 yuan/ton, the actual transaction is a single agreement. Resource-based national investment in potassium 52% of the regional trade out of the warehouse about 2850 yuan/ton, the overall supply is sufficient, the mindset of the business is stable.

The overall trend of domestic potassium sulphate market is relatively stable, the production of Luo Potassium plant is normal, and there is no specific time schedule for summer overhaul plan. At present, the official quotation is stable. The market price is more than 2800 yuan/ton, and there is no new adjustment.

Mannheim potassium sulphate plant is still operating at more than 50% and shipments in the northern region are slightly better than those in the south. Therefore, some northern manufacturers have raised their quotations slightly, ranging from 50 yuan/ton to 2 750-2 850 yuan/ton for 50% of the milled powder and from 2 900 to 3 000 yuan/ton for 52% of the milled powder. Actual transactions are mainly based on orders and orders.

International Energy (IEA) released its monthly crude oil market report on Thursday (April 11). The report shows that global oil markets are tightening as oil supplies in the Organization of Petroleum Exporting Countries (OPEC) countries decline, but warns that oil demand may be reduced because economic growth is threatened.

As Saudi Arabia and its partners cut production and Venezuela and Iran’s exports were squeezed by economic and political crises, global oil supply fell by 340,000 barrels a day in March and crude oil stocks are expected to fall for the rest of the year, according to the monthly report. But it warned that the threat of a global economic downturn from Europe to emerging markets could have a negative impact on fuel demand.

“As we enter the second quarter of 2019, there are signs of tightening in the oil market, but we see mixed signals about demand prospects,” said the IEA, which provides energy advice to most major economies. Demand risk is “in the downward trend at present”.

Brent’s crude oil price has risen by more than 30% this year and is trading at more than $71 a barrel as Saudi Arabia leads OPEC and its allies in production cuts. However, the International Monetary Fund (IMF) predicts that this year will be the weakest year for global economic growth since the financial crisis a decade ago, and concerns about global economic growth have limited the rise in oil prices.

In its monthly report, the IEA said Venezuela’s oil production fell to a long-standing low of 870,000 barrels a day as a result of U.S. sanctions and power outages. “The collapse of the economy, corruption and poor management, together with the recent sanctions imposed by the United States, have severely damaged Venezuela’s oil industry, and the blackout has worsened the situation.” Production fell by 270,000 barrels a day from the previous month, creating the second largest decline in the country’s history, a decrease of 600,000 barrels a day from the same period last year.

Venezuela’s exports fell sharply as Saudi Arabia’s output cut more than expected. OPEC output fell sharply again last month, falling by 550,000 barrels a day to 30.1 million barrels a day in March, and global oil supply declined. The IEA said supply growth outside OPEC would also slow sharply as Canada cut production and North Sea production suffered a decline.

Owing to OPEC’s production restrictions, inventories in developed countries were below their five-year average, falling for the first time in four months in February. Nevertheless, the IEA warned that the demand outlook was shadowing.

Demand risk

The IEA said global crude oil demand growth in 2019 was expected to remain unchanged at 1.4 million barrels per day, supported by robust growth in demand in China and India, but it raised some potential risks.

Consumption in developed countries fell for the first time in the fourth quarter since 2014. In addition, the IEA said it was concerned about the ongoing trade dispute between China and the United States, that demand recovery in the Middle East remained “moderate” and that the economic situation of European countries could deteriorate, and that the situation would be even worse if Britain left the EU in disorder.

The downside may also come from rising oil prices, which are now at $70 a barrel, which are more uncomfortable for consumers than they were at the beginning of the year.

In April, the propylene market was abnormal and prices began to rise. Taking April 2 as an example, enterprises in Shandong, Liaoning and Heilongjiang provinces have raised propylene prices by about 100 yuan per ton. At present, the mainstream transaction price in Shandong market is 6900-7000 yuan/ton. Industry insiders believe that propylene supply is expected to decline, and the short-term market is expected to still have room for growth, but under the constraints of limited demand growth, market growth is limited and the rebound is difficult to sustain.

Expected decrease in supply

Lee, general manager of Lubon Industry Co., Ltd., said that in March, the domestic propylene market price declined due to factors such as increased supply and reduced downstream demand. The average price of Shandong mainstream dropped 522 yuan/ton, or 6.89% compared with February. In April, driven by downstream demand, on-site trading and buying gas significantly warmed up, and the propylene market stopped falling and stabilized. For the future market, industry insiders believe that with the centralized arrival of local refining and overhaul period, supply expectations are reduced, which forms a support for the propylene market.

It is understood that Qiwangda, Changyi Petrochemical, Qingdao Anbang, Huifeng Petrochemical, China Overseas Energy, Ningbo Haiyue, Dongchen Petrochemical and other propylene plants continue to stop for maintenance, Huaxing Petrochemical, Yongxin Petrochemical, Lijin Petrochemical inventory and maintenance plan. Yantai Wanhua 750,000 tons/year PDH plant has been stopped for overhaul on April 1. It is expected that the downstream production facilities will be in normal operation for about 20 days. In addition, in April, the overhaul of cracking units in Korea, Japan and other countries will increase. Overall, the expected reduction in propylene supply, the internal and external disk is expected to form a benign interaction.

However, restarting the plant or suppressing the propylene market. It is understood that the 600,000-ton/year PDH plant in Haiyue of Ningbo was restarted on March 31, and propylene plants such as Qiwanda, Haiyue of Ningbo and Dongfang Hualong are scheduled to resume production in early April, while propylene plants such as Dongming PetroChina, China Overseas Energy and Huifeng Petrochemical Company are scheduled to resume production in mid-April.

“Overall, the supply side of propylene market is still shrinking. In the short term, the market will be more dynamic or will dominate the market. Wang Chunming said.

Cost may be stronger

The upstream crude oil market of propylene is likely to rise, which will support the propylene market.

Meng Ying, an analyst at Jin Lianchuang, said that the threat of output expansion in the United States has weakened and oil drilling will continue to be inactive, which means that crude oil production will be relatively stable, the rapid digestion of refined oil stocks will continue to reduce crude oil stocks, and the price gap between light crude oil and Brent crude oil will further narrow.

Industry insiders believe that OPEC’s repeated attitudes towards production reduction will cause fluctuations in crude oil prices, but low oil prices will seriously harm the interests of oil-producing countries, so OPEC in the actual implementation of production reduction process, will frequently launch good oil price news.

In addition, U.S. sanctions against Iran and Venezuela are still under way, and tightening the sanctions will stimulate a rebound in oil prices. Therefore, the international crude oil market is expected to remain volatile in April, but it does not rule out the possibility of further upsurge or provide good support for the propylene market.

Demand is still constrained

Although the supply side and cost side are strongly supported by the propylene market, the downstream demand is difficult to recover, which dooms the propylene market rebound to be unsustainable.

PP powder market, affected by the “3.21″ accident in Xiangshui, Jiangsu Province, started a large-scale safety production inspection nationwide or again, the downstream powder industry of propylene has increased maintenance efforts, the market supply has decreased expectations, raw material procurement or subsequently declined.

“The downstream propylene oxide industry is currently operating at 78.45%, and the demand for propylene is stable. In the future, the domestic propylene oxide market will continue to maintain an interval fluctuation trend. Value-added tax reform will be implemented on April 1. The overall demand side is weaker than expected in March, which is difficult to drive the propylene market. Zhang Xu, General Manager of Jilin Ruiyang Chemical Trade Co., Ltd.

At present, the overall start-up load of downstream butyl octanol is 88%. Among them, although Tianjin Bohua butyl octanol plant resumed production at the end of March, in early April, Blue Sail Chemical butyl octanol plant and Qilu Petrochemical PP granular plant inventory maintenance plan, and there will be enterprise maintenance after the Qingming Dynasty, resulting in butyl octanol consumption of propylene will be reduced, the lifting role of raw materials will be further weakened, restricting the continuous improvement of propylene market.

Driven by multiple positive factors, international oil prices hit a new high on the 8th. Brent crude oil futures prices in the North Sea and West Texas light crude oil futures prices in the United States both hit their highs in the past five months.

West Texas Intermediate Oil, delivered on the New York Mercantile Exchange in May, rose 50 cents to $62.09 a barrel, the highest level since November 8, 2018. Brent crude for June delivery rose 37 cents to $69.38 a barrel.

It is pointed out that the main factors driving up international oil prices include: market expectations that global supply will be tightened, the war in Libya continues to expand, the Organization of Petroleum Exporting Countries (OPEC) insists on reducing production, and the United States imposes sanctions on Iran and Venezuela.

Investors in the crude oil market are focusing on supply, Reuters reported. The current war in oil-rich Libya could disrupt exports; the eastern army pushed forward to the capital in defiance of global calls for a cease-fire.

In addition, Iran’s current oil exports have fallen by more than half, as the United States is considering tougher sanctions against Iran. Affected by the domestic political situation, Venezuela’s oil production has stagnated. Analysts believe that the reduction of oil supply in Iran and Venezuela will make OPEC’s production reduction plan, which came into effect in January this year, more remarkable. In March, OPEC’s oil supply reached its lowest level in four years, with Saudi Arabia, OPEC’s largest oil exporter, cutting production beyond the amount stipulated in the agreement. Saudi energy minister Falh said it was too early to talk about whether OPEC and its allies agreed to extend the cut, but the May meeting was crucial because the effect of the cut would be clearer by then.

Russia, a big oil producer, has also convinced the market that OPEC and major oil producers want oil prices to keep rising. According to Singapore’s Lianhe Zaobao newspaper, Russian oil officials hinted on the 8th that Russia hopes to discuss oil production at a meeting with OPEC in June due to improved market conditions and declining oil inventories. Russia’s Special Envoy for the Middle East and Saudi Arabia, Dmitriyev, had previously said it was still too early to end production cuts, but he said on the 8th that there might be no need to reduce oil supply after June, indicating a significant shift in his position.

Some analysts point out that recent reports on US crude oil supply show that global crude oil stocks are declining, falling by about 1.2 million barrels in the last week of March. Besides the role of supply and demand, the reason also includes the good economic data of the two major economies of China and the United States. Traders also said that Genscape, a market intelligence firm, showed that crude stocks in Cushing, Oklahoma, where U.S. crude oil was delivered, fell by about 419,000 barrels last week. These factors have strengthened confidence in the oil market.

The continuous rise of crude oil and the upgrading of domestic chemical safety inspection will play a supporting role in the chemical products sector. At the same time, with the arrival of spring inspection and downstream consumption peak season, methanol fundamentals have gradually improved, which will also provide support for methanol prices.

The international crude oil continues to rise, the explosion of sound water continues to ferment, and the peripheral factors support the price of methanol. At the same time, with the improvement of demand, methanol is also supported, and the methanol rebound is expected to continue.

Peripheral factors continuous fermentation

Since last year, domestic chemical futures have risen in varying degrees under the continuous upward trend of crude oil prices.

Recently, OPEC’s crude oil production has been declining continuously, and the global crude oil supply and demand have basically balanced. At the same time, Russia declared its support for OPEC’s production restriction policy. According to the current situation, Russia’s crude oil production is still far from the previous agreed reduction. Therefore, the global international crude oil supply still has the possibility of further tightening, oil prices or sustained upward, which will have a beneficial effect on the chemical sector.

On March 21, an explosion occurred in a chemical enterprise in Xiangshui County Industrial Park, Yancheng City, Jiangsu Province, causing heavy casualties. On April 4, the government of Yancheng, Jiangsu Province, decided to close the industrial park. Although this industrial park does not involve the methanol industry, the market generally believes that the security inspection of chemical enterprises will be greatly strengthened by the government in the later period, and the supply of chemical products will be affected to a certain extent, which will play a supporting role in the short term.

The continuous rise of crude oil and the upgrading of domestic chemical safety inspection will play a supporting role in the chemical products sector. Fermentation of external factors will help methanol prices continue to rise.

Fundamental conditions are gradually improving

Although crude oil prices continue to rise, the trend of methanol futures is weaker than other chemical products. From the current situation, the supply and demand pattern of methanol is slowly improving.

Firstly, on the supply side, in April, the domestic methanol plant centralized into the spring inspection, and the market supply was tightening. At the same time, the United States, Southeast Asia and other places have also been overhauled, the global supply of methanol will decline. Secondly, the production profit of downstream methanol enterprises has been repaired in the near future, coupled with the arrival of the peak consumption season, enterprise procurement has shown a more obvious warming up. Due to the warming up of downstream consumption in formaldehyde production enterprises, the start-up load is likely to rise further, and the consumption of methanol will increase. Although the profit of DME production enterprises has declined sharply, the purchasing volume of methanol will remain stable under the effect of purchasing just in need because of the low stock of DME production enterprises. Acetic acid is affected by the maintenance of international acetic acid plant, the problem of oversupply has been alleviated. In this case, the price of acetic acid has risen slightly recently, and the purchasing of methanol by acetic acid enterprises is expected to increase. Finally, methanol port stocks began to fall at a high level. As of April 4, methanol stocks in domestic ports were around 959.3 million tons, down 25.1 million tons from March 28, down 2.55%.

Forecast for future market

In conclusion, the sustained rise in international crude oil prices has supported methanol prices. At the same time, with the arrival of spring inspection and downstream consumption peak season, methanol fundamentals have gradually improved, which will also provide support for methanol prices. Under the above two factors, methanol is expected to continue to rebound, and the operation of methanol is mainly to buy at bargain.

Thanks to the initiative of OPEC oil producers led by Saudi Arabia to reduce production more than expected, coupled with the slowdown of production growth in the United States, the crude oil market has been strong in recent years. Since April, the focus of crude oil futures prices at home and abroad has obviously moved up. Among them, WTI crude oil rose from $60 to $63.49 a barrel, the highest since November 2018, Brent crude oil also stood on the platform of $70 a barrel from below $68 a barrel. Domestic crude oil contract 1905 also showed strong performance, rising from 455 yuan per barrel to 480 yuan per barrel.

Improvement of liquidity expectations

In order to boost the economy, US President Trump has urged the Federal Reserve to cut interest rates again and publicly recommended the re-adoption of quantitative easing in the financial crisis. There are signs that Trump will intervene in the future direction of the Fed’s monetary policy by nominating two candidates who agree with him as Fed governors. At the same time, the Federal Reserve and its own economic slowdown, the world’s major central banks will further consolidate the tone of easing. Liquidity expectations were loose, confidence in global commodity markets increased, and risk appetite in crude oil markets rebounded significantly.

OPEC’s implementation of output reduction exceeded expectations

Since the beginning of the year, the biggest driver of the rebound in crude oil prices is the reduction of production in oil-producing countries. Until now, this favorable factor is still fermenting and will not be exhausted in the short term. From the implementation of the quarterly reduction, the overall level is higher than expected. According to a survey released by Prussian Energy Information, output in OPEC member countries fell by 570,000 barrels per day in March from a year earlier to 30.23 million barrels per day. The implementation rate of output reduction reached 124% in 11 member countries, up from 79% in February. Among them, Saudi Arabia’s excess production reduction. Data show that Saudi Arabia’s output fell by 280,000 barrels a day to 9.87 million barrels a day, the lowest since February 2017.

Although Venezuela, Iran and Libya have been exempted from the implementation of the reduction agreements, for their own reasons, the three countries are in a passive state of production reduction. Venezuela is in the dilemma of massive blackouts in the face of U.S. sanctions, forcing the shutdown of heavy oil production facilities in Venezuela. Data show that Venezuela’s output fell to 740,000 barrels a day in March. At present, Iran’s output is relatively stable, with crude oil production of 2.69 million barrels per day in March, and by the end of the U.S. sanctions exemption period, crude oil production may decline substantially.

US output growth slowed down

For a long time, the sharp growth of shale oil production in the United States has not only occupied the market share of OPEC oil-producing countries, but also weakened the profit atmosphere created by OPEC member countries’efforts to reduce production, and become the biggest negative factor in the oil market. Recently, however, the number of active drilling rigs in the United States has declined. In the week ending April 5, 831 seats were the lowest since May 2018.

In view of the decrease in the number of active drilling rigs, the leading indicator of U.S. crude oil production, the U.S. government has reduced its forecast for crude oil production growth from 1.45 million barrels per day to 1.35 million barrels per day, while its output is expected to be 12.3 million barrels per day. The slowdown in U.S. crude oil production growth is conducive to boosting market enthusiasm. Fund position data show that as of April 2, WTI crude oil non-commercial net multi-position volume was 481361, the eighth consecutive week of increase, and is the largest since mid-October 2018.

Overall, the global market is still in a tight supply situation in the second quarter. With the improvement of the macro atmosphere, the focus of crude oil prices will rise further.

According to Dow Jones, S&P Global Platts data showed that OPEC crude oil production fell to its lowest level in more than four years in March. Total OPEC crude oil production, comprising 14 member countries, fell to 3.23 million barrels per day in March, down 570,000 barrels per day from February levels. One of the OPEC member countries, a market hotspot in the Americas, produced 740,000 barrels a day in March, falling to the lowest level in the past 16 years. Saudi Arabia, OPEC’s largest oil producer, has dropped to 9.87 million barrels a day, the lowest level since February 2017.

With several major breakthroughs in exploration and development, shale gas has recently become hot again. As a large reserve country, China has 21.8 trillion cubic meters of recoverable shale gas resources, but the current proven rate is only 4.79%, which has huge resource potential. At a time when China’s dependence on natural gas is increasing, the value of unconventional natural gas shale gas exploitation is self-evident. The breakthroughs in exploration and mining technology are encouraging, but more attention should be paid to the reform of prospecting right mechanism and the follow-up of related supporting policies.

Shale gas has recently caught fire again. With the release of several major discoveries in exploration and development in recent years, shale gas has gradually become the core growth point of China’s natural gas industry. At a time when China’s dependence on natural gas has climbed to 45.3%, the news is very interesting.

Industrial Development

At the end of March, Sinopec announced that significant breakthroughs had been made in the exploration and development of shale gas in Sinopec: Weiyuan (far) Rong (county) Shale Gas Field submitted its proven reserves of 124.7 billion cubic meters, and 1 billion cubic meters of production capacity would be built this year; Dongsha Shen-1, the first high-yielding shale gas well in Dingshan-Dongxi Block, with a depth of more than 4200 meters, produced 310,000 cubic meters of high-yielding gas per day, breaking through the buried depth of over 4,000 cubic meters. Fracturing technology for shale gas wells of 1000 meters.

Two months ago, the China Geological Survey announced a major breakthrough in shale gas survey in Western Hubei, China. The amount of shale gas geological resources is 11.68 trillion cubic meters, which has a resource base of 10 billion cubic meters per year. Therefore, the western Hubei region is expected to become a new base for shale gas exploration and development and natural gas production in China, forming a “tripod” resource pattern with Fuling and Changning-Weiyuan in Chongqing, breaking the situation that China’s shale gas development is concentrated in the upper reaches of the Yangtze River.

Natural gas is the cleanest energy in traditional fossil energy. With the development of green and low carbon, China’s demand for natural gas is increasing.

In January this year, China’s oil and gas industry development report at home and abroad, published by the China Petroleum Economic and Technological Research Institute, showed that in 2018, China’s natural gas imports reached 125.4 billion cubic meters, an increase of 31.7%. For the first time, China’s imports surpassed Japan and became the world’s largest natural gas importer, with its external dependence rising to 45.3%. This means that nearly half of China’s natural gas needs to be imported from abroad.

Ju Jianhua, director of the Mineral Resources Protection and Supervision Department of the Ministry of Natural Resources, said that China’s recoverable shale gas resources amount to 21.8 trillion cubic meters, ranking first in the world. At present, the proven rate of shale gas in China is only 4.79%, and the potential of resources is huge.

Shale gas, a kind of unconventional natural gas, is stored in organic-rich shale and its interbeds, mainly composed of methane, which was previously considered difficult to develop economically and effectively. However, with the successful application of large-scale fracturing technology in horizontal wells, the development and utilization of shale gas has developed rapidly.

As a large reserve country, China has every reason to make great achievements in shale gas industry. Ju Jianhua said that from September 2014 to April 2018, in less than four years, China has discovered Fuling, Weiyuan, Changning and Weirong shale gas fields in Sichuan Basin. The cumulative proven geological reserves of shale gas have exceeded trillion cubic meters, with a production capacity of 13.5 billion cubic meters and a cumulative gas production of 225.80 billion cubic meters. China has become another country to realize large-scale commercial development of shale gas fields after North America.

At present, Fuling shale gas field is the largest shale gas field in China. Last March, Sinopec announced that Fuling Shale Gas Field has an annual production capacity of 10 billion cubic meters, equivalent to the construction of a 10 million tons of large oil field. In 2018, Fuling shale gas field produced 6.02 billion cubic meters of shale gas and sold 5.78 billion cubic meters.

Why can we develop rapidly?

There is no doubt that the world’s largest reserves and huge market gap have promoted the rapid development of shale gas in China in just a few years. Among them, policy plays an important role in promoting. At the end of 2011, with the approval of the State Council, shale gas became the 172nd independent mineral in China.

In October 2013, the State Energy Administration promulgated the Shale Gas Industry Policy, which made it clear that the state would directly subsidize the shale gas production enterprises according to the amount of shale gas development and utilization. From 2012 to 2015, the central financial subsidy standard was 0.4 yuan per cubic metre, which was twice as high as that of CBM subsidy standard. During the 13th Five-Year Plan period, the subsidy standard for shale gas was adjusted to 0.3 yuan/cubic meter in the first three years and 0.2 yuan/cubic meter in the second two years.

At the same time, shale gas mining enterprises also enjoy policies such as reducing or exempting compensation fees for mineral resources and royalties for the use of mineral rights. From April 1, 2018 to March 31, 2021, the Ministry of Finance and the General Administration of Taxation reduced the tax on shale gas resources by 30%.

Meanwhile, great breakthroughs have been made in shale gas exploration and exploitation technology in China. “China has innovated and formed a series of practical cleaner production technologies suitable for the characteristics of shale gas development, realized cleaner production in the whole process of gas field exploration and development, and formed the theory of shale gas reservoir formation with Chinese characteristics, core exploration and development technologies, which laid an important foundation for the rapid development of shale gas industry in China.” Ju Jianhua said.

According to media reports, the cost of a single well in Fuling shale gas field, the largest shale gas field in China, has been reduced by more than 30% compared with the early development stage in 2014.

In the new breakthrough of Sinopec shale gas exploration and development, technological breakthrough is also one of the important highlights. In Dingshan-Dongxi block, Sinopec’s deep shale gas key test well, Dongshashen 1 well, produced 310,000 cubic meters of high-yield gas per day in high-quality shale gas reservoirs with a depth of 4270 meters, breaking through the fracturing technology of shale gas wells with a depth of over 4000 meters, laying a technical foundation for large-scale commercial development of deep shale gas.

Kang Yuzhu, academician of the Chinese Academy of Engineering, pointed to the shale gas breakthrough of the Bureau of Geological Survey in Western Hubei, and said that the results of the shale gas investigation in Western Hubei were strategic breakthroughs and had a landmark leading role. The results generally reached the international advanced level, and some of them reached the international leading level.

Greater growth prospects are promising

At present, there are still some constraints in shale gas exploration and development.

Firstly, the investment scale of shale gas construction is large, the implementation cycle is long, and there are many uncertainties. The investment enthusiasm of some small and medium-sized enterprises has declined.

In 2011, shale gas was listed as the 172nd independent mine in China. Its original intention was to introduce multiple investors into the shale gas industry and implement a highly centralized system different from the natural gas industry. In 2011 and 2012, the former Ministry of Land and Resources held two tenders for the transfer of prospecting rights, of which 20 tender blocks attracted 83 enterprises. However, as the international oil price declined, the heat of shale gas in small and medium-sized enterprises declined greatly. The third shale gas tender was delayed until 2017. Previously, many enterprises that have obtained shale gas exploration rights have fallen into the strange circle of “circle without exploration” because of the excessive demand for funds and uncertain prospects.

Secondly, because shale gas reserves in China are generally deep buried and mostly in mountainous areas, large-scale operations are difficult to carry out, and exploration and development are difficult.

In addition, the experts said that although there is a lot of policy support for shale gas at the policy level, there is still a lack of management policies for shale gas exploration and development in China. Most of them still refer to the traditional oil and gas operation rules, so it is necessary to formulate more targeted regulatory policies.

The State Energy Administration (SEA) has proposed in the Circular on the Issuance of Shale Gas Development Planning (2016-2020) that efforts should be made to achieve 30 billion cubic meters of shale gas production in 2020 and 80 billion cubic meters to 100 billion cubic meters of shale gas production in 2030.

At present, it is still difficult to achieve this goal. However, under the pressure of resources and environment, shale gas will have more room for growth in the future.