Shale Gas Revolution Not Coming To China Anytime Soon
By Simon Montlake
Shale gas has upended U.S. energy markets, cutting oil imports to their lowest level in two decades. Can China pull off the same feat? It has already passed the U.S. as the biggest buyer of oil cargoes and by far the largest burner of coal, which explains the noxious air pollution that cloaks its northern cities. Hydraulic fracturing, or fracking, of underground reserves offers a way to cut emissions while feeding heating systems and power plants. It now accounts for around 40% of U.S. natural gas production. The topic was certainly on the agenda of visiting U.S. Secretary of Energy Ernest Moniz, who met with Chinese government officials and oil-industry executives during a three-day visit that ended Wednesday. At a media briefing on Wednesday, Moniz said there was a strong interest in both countries in collaborating on unconventional oil and gas. “We have a lot of practices to share,” he said.
But the challenge for China doesn’t just lie below the ground, in terms of extracting shale gas (its deposits are deep and found mostly in the arid west and southwest). Moniz drew attention to “above-ground issues” for bringing gas to market in which China lags behind the U.S. ”It’s often forgotten that in the US not only did we have obviously a favourable geology for producing these resources, but we also had by far the most mature natural-gas infrastructure in terms of pipelines, market structures, trading hubs, futures contracts, regulation of production etc,” he told reporters. For China to develop its resources “at a large scale and in a rapid fashion”, it must tackle these issues. Moniz noted that Chinese companies were beginning to invest in U.S. shale fields and that U.S. companies had formed partnerships in China to tap unconventional hydrocarbons.
In fact, the most aggressive foreign player is Royal Dutch Shell, which is drilling for shale gas in Sichuan. Its partner is PetroChina, one of three giant state-run oil and gas companies in China. To get access to Chinese hydrocarbons, you need one as your partner.
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