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* Tight gas output to triple by 2030 - ACE
* Shale gas, coalbed methane trail in unconventionaldevelopment
* Flagship tight gas play Sulige, China's largest gasproducer
* To expand low-cost model, home-grown expertise
By Chen Aizhu
SULIGE, China, July 9 (Reuters) - At the heart of the vastdesert region of Inner Mongolia, half a dozen young engineersfrom PetroChina watch huge, flat screens in a brightlylit central control office that oversees 5,000 wells at China'slargest gas field.
Just a few years ago, two workers travelling in a truckwould need three days to check conditions at 50 wells at theSulige field, which spans 20,000 sq km (7,700 sq miles) in themiddle of Maowusu, China's third-largest desert: now, the taskcan be done in just five minutes.
Remote Sulige, which means "uncooked meat" in Mongolian, istestament to China's success in developing its giant reserves ofso-called "tight gas", part of a drive to dramatically boostconsumption of cleaner burning natural gas to help replace dirtycoal and costly oil imports.
Like the better-known shale gas revolution in the UnitedStates, tight gas is transforming China's gas production -accounting for a third of total output in 2012 -- and will formthe backbone of the country's push to expand so-called"unconventional" gas production nearly seven-fold by 2030.
The speed and size of the boom has outstripped forecasts andhas been led by local firms developing low-cost technology andtechniques, already being rolled out by Chinese companies insimilar gas fields outside of China.
Like shale gas, although less difficult to extract, tightgas is an unconventional deposit that needs special technologysuch as horizontal drilling or fracturing to free gas trapped intiny cavities in rocks like sandstone.
Output of tight gas hit 30 billion cubic metres (bcm) in2012 -- nearly a third of China's total gas output -- and isexpected to rise to 100 bcm by 2030, leading an unconventionalfuel boom ahead of shale or coal-seam gas.
"We found our own approach to develop tight gas," said HuWenrui, a former Petrochina vice president and a key architectbehind developing the deposits. "With this, China's tight gashas entered the fast track."
Forecasts by the China Academy of Engineering (ACE) put 2020output of tight gas at 80 bcm, more than a forecast 50 bcm ofcoalbed methane and 20 bcm of shale gas combined.
Despite the excitement over shale gas, of which China holdslarger reserves than the United States, the world's top energyuser has taken only baby steps to exploit the more complexdeposits, drilling just 80 or so wells by the end of last year.
Its output of coal-seam gas continues to disappoint aftertwo decades of development, reaching about 6.5 bcm in 2012.
LOW COST LIFELINE
Tight gas production at Sulige alone is set to top 20 bcmthis year, making up nearly a fifth of China's total gas output,but PetroChina initially struggled to develop the field afterdeclaring it the country's largest in 2001.
Global energy companies like Royal Dutch Shell,Total and BP were brought in to do detailedstudies and service companies including Schlumberger andBJ Services, now part of Baker Hughes, were invited toprovide drilling and logging expertise.
"The success that PetroChina has had on tight gas isimpressive," said Craig McMahon, head of Asia upstream researchof energy consultancy Wood Mackenzie.
"Back in 2005 when they offered some of the contracts toShell and Total it perhaps meant they did not have the expertiseyet. Eight years on, you can say PetroChina is very comfortableoperating Sulige on its own."
PetroChina focused on the cost-efficient drilling andmanagement of thousands of wells, cherry-picking experts fromsix regional Chinese exploration companies.
"Low cost is the lifeline for Sulige," reads a posterdisplayed in an open courtyard at Sulige's headquarters in thecounty of Wushen, Inner Mongolia.
The company cut the time needed to drill a typical3,200-metre vertical well by two-thirds to 15 days, while theaverage cost of a well has fallen 40 percent over the past eightyears.
Cluster wells -- with well-heads tightly grouped on the landsurface but diverging in multiple directions underground -- arewidely applied to reduce the use of surface infrastructure.
Instead of high-pressure fracturing to force open the cracksin rocks and allow gas to escape, PetroChina engineers came upwith new ways to use low and medium-pressure fracturing.
"In the end we realized it's about applying a series oftechnologies, not necessarily cutting-edge, but that best suitSulige," said Zhao Jianxin, a PetroChina manager at the field."The sophisticated technologies provided by internationalcompanies did not work here, as they were too costly."
FEW FOREIGN ENTRANTS
Some three-quarters of China's newly proven gas reserves aretight gas, says PetroChina's Hu, led by the vast Ordos basin,which includes Sulige and spans five provinces and regions.
Ordos has a proven gas reserve of 4 trillion cubic metres,equivalent to 40 years of China's total production at the 2012level. Projects include the Shell-operated Changbei block andthe Total-invested Sulige South block.
Southwest China's Sichuan basin, where the second-largeststate energy major Sinopec Corp is also active, islikely to be the next major play.
However, unlike coalbed methane and shale, which have beenopened up to wider competition, experts say China is unlikely tooffer new tight gas contracts to companies outside PetroChinaand Sinopec, beyond those already there.
"Now that they've honed the expertise and management skills-- a lot through learning from international companies -- andovercome the technological hurdles, it will be harder to seethem readily offering more tight gas blocks," said an officialwith an international energy firm working in China, who declinedto be named.
PetroChina, a proven player in boosting output at ageing andmarginal oilfields in countries like Iraq, Venezuela andAlgeria, also hopes to apply its tight gas know-how beyondChina's borders.
PetroChina's parent, CNPC, is already applying Sulige-styleengineering and drilling skills in Turkmenistan, said Hu, thelargest source of China's gas imports via pipeline.
"The technological strength we have on tight gas would giveus more confidence assessing similar prospects overseas," saidMao Zefeng, PetroChina's investment relations manager.
