China recently announced aggressive shale gas production targets of 6.5 billion cubic meters (cm) of natural gas by 2015 and up to 100 billion cm by 2020. Although the shale gas story is still in its early stages in China, the country’s plans for huge expansion are for real.

China is a prisoner of oil producers, which puts energy security at the forefront of the Chinese leadership’s strategic economic plans. The country is projected to import at least 10 million barrels of oil per day by 2020, 10 percent of estimated global production. While natural gas only plays a minor role in primary energy use at around 4 percent, China intends to increase the proportion of gas in its total energy mix.

China enjoys huge unconventional natural gas resources. Taking its cue from the success of the US in this sector, China is poised to greatly reduce its dependency on foreign suppliers for gas.

US shale production was very low between 2000 and 2005, but it took off after 2006, soaring from 15 billion cm in 2005 to 31 billion cm by the end of 2006. Since 2006, growth has hovered at around 50 percent per year.

China now has scant domestic shale gas production. Consequently, high gas imports will be unavoidable even beyond 2020, unless the country starts hitting its production targets. The latter will prove to be a challenge, given China’s lack of experience with shale gas geology and procedures. However, this challenge presents a huge investment opportunity.

China is preparing to award 20 new shale gas blocks, which should spark a wave of exploratory activity in the sector. China currently has 62 shale gas wells in trial development zones.

The www.GlobalInvestmentStrategist.com Model Portfolio has exposure to this long-term investment trend through Sinopec (NYSE: SNP). The company announced last month that it has started development of its shale gas project in the Peiling block in Sichuan, aiming to produce 0.3-0.5 billion cm of shale gas by the end of the year and 1 billion cm by the end of 2013.

Sinopec has budgeted more than USD12 billion for upstream operations for this year and management expects that a big part of this money will go towards unconventional gas development. The company is also working with BP (NYSE: BP) and Total (NYSE: TOT) on other shale development blocks.