Last June, our Investment Director Karim Rahemtulla told readers about all the difficulties that China faces in developing its vast shale gas resources.

These difficulties include more complex geology and deeper gas deposits than the United States, and lack of adequate water and midstream facilities – such as pipelines.

Nearly a year has passed, and I wondered if China has made any progress in its long march toward developing its shale-gas bounty.

The answer?

Not much.

After all, fewer than 100 shale gas wells have been drilled in China, to date. By comparison, 40,000 or so shale gas wells were drilled in the United States.

But progress is progress, right?

Sinopec Leading the Way

Sinopec ADR (SNP) is leading the way with shale gas development in China.

It’s putting its first commercial shale gas field into production much sooner than expected. The field is located at Fuling, near the city Chongqing.

Annual production at the Fuling field should reach 1.8 billion cubic meters (bcm) by the end of the year. This will rise to 5 bcm by 2015, and 10 bcm by 2017.

Not long ago, Sinopec had forecast production of only 2 bcm by 2015 – at all of its shale plays.

That should mean China will hit its target of 6.5 bcm of shale gas production by 2015. This is a target that western energy analysts had said was unrealistic, but now it’s within sight.

Sinopec plans to use some of the proceeds ($4 billion to $5 billion) of an approximate $20-billion sale of its gasoline stations to fund its shale gas development plans.

Royal Dutch Shell Partners With PetroChina

The other main player making headway in China’s shale gas development is Royal Dutch Shell PLC ADR (RDS.A). It has partnered with China National Petroleum Corporation (CNPC), the parent of PetroChina ADR (PTR), in shale gas projects.

The two companies have completed the preliminary development plan for the Changning-Weiyuan block in the Sichuan province.

Currently in the block, there are nine wells in production with another eight expected to come online this year. By 2015, that area is targeted to have 110 wells commissioned.

By that date, CNPC is expected to produce about 1 billion cubic feet (bcf) to 1.5 bcf of shale gas, annually.

What the Future Holds

So progress is certainly being made in China’s shale gas development.

But all the challenges remain with developing China’s shale gas resources.

Currently, there’s no great technological breakthrough for easier access to those reservoirs.

That makes it hard to see how the Chinese government’s target of 60 bcf to 100 bcf of shale gas production by 2020 will be met. For comparison, the U.S. produced 265.3 bcf of shale gas in 2012.

The good news is that China recently decided to boost private sector participation, among other reforms, in the shale gas sector.

The Chinese government knows it was small U.S. energy companies that led the shale revolution in the United States. So it, too, hopes to tap entrepreneurial spirits.

Perhaps one of these private sector companies will make the “great leap forward” in developing technology that makes accessing China’s shale gas riches easier.