Water shortages are among the obstacles delaying China's progress in shale gas. Image: AIG.

China to Gain from US Shale Gas Experience


Shale gas has fundamentally altered the United States’ energy landscape, generating new jobs, increasing America’s energy independence, and providing a new source of energy. It is no surprise then that China is also attracted to this industry, particularly in light of the nation’s enormous energy consumption and current reliance on coal – a notoriously dirty fuel source.

China is blessed with an abundance of this form of natural gas, with an estimated 31 trillion cubic meters of discoverable gas, more than anywhere else on earth.

In what is a new era in US-China energy cooperation, the two nations have collaborated in a number of areas. Beginning in 2009, the Shale Gas Resource Initiative saw both parties agree to American assessments of Chinese shale gas development, conducting of joint technical studies to accelerate development of shale gas resources in China, and the promotion of shale gas investment through the US-China Oil and Gas Industry Forum, study tours, and workshops.

Early last year China Petroleum & Chemical Corporation (better known as Sinopec), a major state-owned oil producer, bought a 50% stake in Oklahoma’s Chesapeake Energy, the second largest natural gas producer in the United States. Nearly a quarter of all jobs in Oklahoma are related to the energy industry, with Chesapeake itself employing around 13,000 people. Sinopec’s purchase of half the company’s oil and gas assets is mutually beneficial, helping relieve Chesapeake of its significant accumulated debt, while offering China hands-on experience with successful shale gas operations.

Despite American assistance and the enormous potential rewards, the shale gas industry in China is still in its very early stages. There has been recent optimism from Sinopec and its competitor PetroChina due to steadily declining costs, but there are still numerous challenges facing the industry. Unlike in the US, China’s shale gas is located in remote, mountainous regions, often in areas lacking basic infrastructure, with deposits significantly deeper underground than in America. Particularly in China’s Sichuan province, water shortages are hindering the extraction process, which requires large quantities of water.

While China works to address logistical challenges, the partnership with the US will continue to be a useful knowledge resource to support China’s growth in clean energy, a role which the US has been happy to play for several other Asian nations in recent years.

Jonathan Gordon recently graduated from the University of Sydney and is a Research Intern at the East-West Center in Washington, D.C.