# Research on Factors Affecting the Optimal Exploitation of Natural Gas Resources in China

^{1}

^{2}

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## Abstract

**:**

## 1. Introduction

^{12}m

^{3}in 1981 to 63 × 10

^{12}m

^{3}in 2010; these data have been assessed by various scholars and divisions over the past thirty years and, thus, are validated. China recorded (39.0–39.2) × 10

^{12}m

^{3}recoverable conventional gas resources; this is an immense amount for any type of major gas producer and will provide a solid foundation for the sustainable development of China’s natural gas industry. However, large gas fields in China are mainly distributed in the mid-west and include the Ordos Basin, the Sichuan Basin and the Tarim Basin. The “gold” buried at the depths of reserves is deeper than that abroad with low pressure and a low discovery rate, i.e., the reserves buried at depths of 3000--4500 m account for 46.11% of the total reserves of China. Hence, their exploration will be more difficult, generate higher costs and have a greater environmental influence. As a result, the well-head price of gas in China is equivalent to the border prices of Europe’s imported gas from Russia. The influence of factors, such as geology, technology, policy and regulation, makes it difficult to effectively convert China’s gas reserves into economic output, thereby preventing natural gas enterprises from generating more profits. The effective exploitation of existing natural gas under varying conditions has become a primary concern for major oil-gas enterprises. Thus, it is vital to analyze corresponding incentives, including economic, technological and regulation factors, which shape the optimizing paths in China.

## 2. Literature Review

## 3. Optimal Exploitation Model of Natural Gas Resources

#### 3.1. Objective Function

#### 3.2. Constraint Conditions

#### 3.3. Optimal Conditions

## 4. Optimal Exploitation Path of Natural Gas Resources

#### 4.1. Parameters Setting

#### 4.1.1. Gas Field Exhausting Time $T$

#### 4.1.2. Marginal Exploitation Cost of Natural Gas $MC$

^{3}; the marginal cost of development is $MCD=0.05$ CNY/m

^{3}; and the coefficients of the marginal cost of production $MCP(t)$ are $a=0.02,b=0.082,c=0.056,d=0.004,e=-0.04$.

#### 4.1.3. Discount Rate $r$

#### 4.1.4. Recovery Rate $h$

#### 4.1.5. Exhausting Rate of Gas Wells $\tau $

#### 4.1.6. Reserves $S$

^{3}. For simplicity, the closing natural gas reserves are denoted as $S(T)=0$.

#### 4.2. Optimal Path

## 5. Result Analysis and Discussion

#### 5.1. Increase in Discount Rate Accelerating Natural Gas Exploitation

#### 5.2. Increase in Recovery Rate Increases Economically-Recoverable Reserves of Natural Gas

#### 5.3. Exhausting Rate of Gas Wells Extending the Distribution of Natural Gas in Fields

#### 5.4. Price Increase Leads to Increased Economically-Recoverable Reserves in Gas Fields

## 6. Conclusions and Remarks

## Acknowledgments

## Author Contributions

## Conflicts of Interest

## Nomenclature

Abbreviation | |

NOC | National Oil Company |

Sinopec | China Petroleum and Chemical Corporation |

NDRC | National Development and Reform Commission |

m^{3} | cubic meter |

Model Symbol Definitions | |

P | market price of natural gas (CNY/m^{3}) |

C | total cost of natural gas exploitation (CNY/m^{3}) |

t | time series |

T | gas field exhaustion time (year) |

r | discount rate of capital (%) |

h | recover rate of the gas field (%) |

τ | exhausting rate of gas wells (%) |

S | proven recoverable reserves (m^{3}) |

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Period (Years) | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 |
---|---|---|---|---|---|---|---|---|---|---|---|---|

Statistical data (10^{8} m^{3}) | 1.2 | 3.8 | 7.7 | 12.1 | 14.6 | 16.6 | 19.2 | 22 | 25.3 | 28.6 | 32.2 | 36.1 |

Practical data (10^{8} m^{3}) | 1.4 | 4 | 10.5 | 14.3 | 13.8 | 14.2 | 17.8 | 22 | 24 | 28 | 31 | 34 |

Error (%) | −14.3 | −5 | −26.7 | −15.4 | 5.8 | 16.9 | 7.9 | 0 | 5.4 | 2.1 | 3.9 | 6.2 |

© 2016 by the authors; licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC-BY) license (http://creativecommons.org/licenses/by/4.0/).

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**MDPI and ACS Style**

Xiao, J.; Wang, X.; Wang, R.
Research on Factors Affecting the Optimal Exploitation of Natural Gas Resources in China. *Sustainability* **2016**, *8*, 435.
https://doi.org/10.3390/su8050435

**AMA Style**

Xiao J, Wang X, Wang R.
Research on Factors Affecting the Optimal Exploitation of Natural Gas Resources in China. *Sustainability*. 2016; 8(5):435.
https://doi.org/10.3390/su8050435

**Chicago/Turabian Style**

Xiao, Jianzhong, Xiaolin Wang, and Ran Wang.
2016. "Research on Factors Affecting the Optimal Exploitation of Natural Gas Resources in China" *Sustainability* 8, no. 5: 435.
https://doi.org/10.3390/su8050435