According to Chou, another barrier is the rights regime, with a lack of private ownership of land and mineral rights.

“Private ownership makes it easier for land transfer or leasing. It is no coinciden[ce] that the U.S. shale gas revolution mainly took place on privately-owned land,” Chou said. Although China’s Development Plan for Shale Gas (2011-15) gives developers priority when applying for a land-use permit, it has yet to solve the problem.

Overlapping land use and mineral and exploitation rights are other obstacles to the industry’s development. Since shale deposits are usually deep underground, several entities can hold differing mineral rights over the same area. In addition, current shale exploration and development blocks largely overlap with areas where PetroChina and Sinopec possess conventional oil and gas rights, making it difficult for new entrants.

According to Deloitte, the estimated cost of drilling a single shale well can reach $16 million, making a proper rights system essential for investment. Recent horizontal gas wells drilled by CNPC in the Sichuan basin have cost around $11 million each, compared to the average cost of $4-6 million in the United States.

Despite last year’s hike, pricing is another issue for an industry requiring high initial capital, advanced technology and long-term investment. China’s average LNG price is still around 40 to 60 percent higher than for domestically produced gas, despite moves by Beijing to expand market-based pricing.

While China needs to develop a regulatory and pricing regime that attracts foreign investment and competition, it faces pushback from powerful national oil companies (NOCs) and some local governments, Chou suggests.

“The ‘shale gas revolution’ that swept across [the] U.S. is unlikely to repeat in China by 2020, particularly because of the water resource and land rights bottlenecks. China should be realistic about its shale development outlook and commit to take effective actions to address the various environmental, technological and regulatory challenges,” Chou argues.

According to Gao’s estimates, China will only reach 5 bcm shale-gas production by 2015 and 10 bcm by 2020, well below its previous targets. Furthermore,

[a]lthough various sources have estimated that China has one of the largest technically recoverable unconventional gas resource bases in the world, very little exploration has been carried out to confirm its detailed characteristics and productive capacity…Whether or not unconventional gas will be developed on a scale that will have a significant impact on the Chinese and global gas markets largely depends on how quickly the government can co-ordinate the interests of different stakeholders in an area where little national experience exists.

The United States took two decades to achieve its “overnight” success in shale gas. For China, the shale revolution will not be delivered any more quickly, making imported LNG crucial until its shale industry picks up speed.

Anthony Fensom, a Brisbane, Australia-based freelance writer and consultant with more than a decade's experience in Asia-Pacific financial/media industries.

Image: Flickr/Nicholas_T/CC by 2.0