China's ambitious quest for shale gas

The village of Xinchao, in China's eastern province of Zhejiang, seems an unlikely place to start an energy boom.

The people here have tended their crops in the fields and planted their nut trees on the steep surrounding mountain slopes for generations.

But lately they have learnt that deep in the ground beneath them lies a vast potential supply of gas.

"We've heard the rumour that there's oil underground," said one woman. "People say we're all going to have to move out."

There is no way of knowing whether they really will have to move, but the village finds itself on one of more than 20 blocks of land for which the Chinese government has very high hopes.

It is a national mining project that, in terms of timescale at least, is one of the most ambitious ever undertaken anywhere: a dash for shale gas.

More blocks are to be auctioned off soon, and in clear signal of government intent, a few days ago Royal Dutch Shell was given official approval for its partnership with a state-owned company on blocks in the country's western Sichuan province. After the initial test drilling phase it is hoped that they can move to commercial gas production within the space of a few years.

China's bold plan is to go from an absolute beginner to one of the world's biggest producers of shale gas within less than a decade.

The reason why the country's economic planners are suddenly so interested in what lies beneath the Chinese countryside is easy to spot.

The filthy air now choking many of China's cities is so visible, so poisonous, that it has become a major political headache for the Chinese government.

Coal-burning power stations, used to produce 70% of China's energy needs, are responsible for much of that smog.

So with shale gas reserves estimated to be bigger than the US and Canada's combined, the government sees an opportunity.

Hydraulic fracking uses large amounts of water laced with chemicals to fracture the deep underground layers of shale.

In the US, the natural gas released from the rock in this way has brought an energy windfall.

But it took the US 60 years and tens of thousands of wells to reach its current output of around 170 billion cubic metres a year.

China hopes to go from nothing to well over half of the US production rate in less than a decade - up to 100 billion cubic metres by 2020.

As well as rebalancing China's domestic energy mix away from coal, there is another reason.

"First of all, it is necessary to exploit shale gas from the point of energy security," said Wang Ruiqi, an analyst with the market intelligence company ICIS.

"Our dependency on imports of natural gas is quite high now."

Ms Wang is confident that at least the medium-term target - to produce 6.5 billion cubic metres of shale gas by 2015 - is achievable.

But others are not so sure.

In the village of Xinchao, they are butchering a pig, the fatty loins of the animal wobbling as the cleaver cuts through bone.

If a shale gas boom really does come to these parts, then these old rhythms of life may change.

But there is little public information, only rumour - a stark contrast to America where there is a vigorous public debate over concerns that fracking may cause serious environmental harm by contaminating drinking-water aquifers with chemicals.

And for China in particular, there is another serious concern.

The high volume of water needed for fracking will be a big challenge for a country that already has serious shortages.

Some estimates suggest that even for the 6.5 billion cubic metres target, the fracking industry would need to consume more than a third of the total amount of water already used by China's entire industrial sector.

There is also a potential technological challenge.

America's shale gas deposits lie around 2,000 metres below the surface. In China they lie much deeper, up to 4,000 metres.

That could make the gas much more costly to extract.

"I'll move, I'll go and see the outside world," one woman in Xinchao, busy weeding her field, replies when asked what she'll do if fracking really does come to town.

But it may never happen.

There are serious doubts about whether China's countryside really can produce fuel fast.

What is even less clear for China is whether shale gas is a resource worth the cost, or a troublesome harvest best left well alone.

Correction 9 April, 2013: We have made clear that Shell has been granted approval for test drilling, but not yet for production.