China and the United States may have trade disputes over green technologies. But they will still be collaborating in the shale gas arena.

China needs foreign technology and capital to get at its vast shale gas reserves -- fuel that it desperately needs to feed its energy appetite at 12 percent growth a year. If it is able to access its plethora of recoverable shale gas, it would then become far more reliable, independent and, perhaps cleaner.

“We remain positive that China’s domestic shale gas will be a major boost to supply growth, producing approximately 150 billion cubic meters per annum by 2030,” says Gavin Thompson, head of Asia Pacific gas research for the consulting firm Wood Mackenzie.

He is emphasizing that China’s opportunity could be realized over the long term but that short term, it will still be importing fuels. China’s National Energy Administration says that shale gas production could reach 6.5 billion cubic meters in 2015 and 60 billion cubic meters in 2020.

The United States also has an abundance of proven shale gas reserves. The difference between this country and China is that producers here not only have the tools to ply loose the shale from deep underground but they also have a more sophisticated network of pipelines and storage facilities.

While foreign nationals may see shale gas opportunities in China, they will nonetheless be restricted in their ownership of such stakes to 49 percent. Beyond that, the rule of law there is different.

To that end, Royal Dutch Shell has made a big news splash: It announced in March that will it will be the first foreign company to enter into such an agreement with China. It said that while China is geographically more complex than in North America, it still feels that its pursuit there will be profitable.

“China has huge shale gas potential and we are committed to making a contribution in bringing that potential into reality,” says Peter Voss, chief executive of the oil giant, in a news release.

Environmental Role

China, which has doubled its energy consumption in the last decade, did so because of its large population and the need to electrify rural areas as well as to build out its manufacturing complexes. Coal provides about two-thirds of its electric generation while green energy supplies 9 percent. Its goal is to raise its renewable portfolio to 15 percent in 2020.

Meanwhile, China says that its aim remains bringing more nuclear power on line so that it will eventually provide as much as one-third of its energy needs. Mainland China has twelve nuclear power reactors in commercial operation -- six of which have become operational since 2002, and 23 under construction.

The International Energy Agency says that China will require at least $4 trillion to build out its infrastructure so that it can keep the lights on. A growing China gives American enterprises new business opportunities. The two already cooperate in the nuclear field and with the advent of hydraulic fracturing technologies, ample possibilities exist right now in the shale gas domain.

Price and supply fluctuations triggered rolling blackouts in China in 2011. By developing shale gas, the central government there can more easily control pricing, says ThinkProgress. Long term, this is a more viable energy strategy that either importing LNG or oil, it adds. As such, the United States can work with China to not just maximize the benefits of shale gas development but to also help it reduce its environmental risks from fracking, or drilling. 

“The United States and its oil companies should not supply China with hydraulic fracturing technology without combining that technology with safety standards and environmental best practices,” write Melanie Hart and Daniel Weiss of ThinkProgress. “This includes capturing fugitive greenhouse gas emissions, monitoring the chemicals used in fracking fluid, and treating the wastewater to avoid contaminating local waterways.”

Shale gas may not just revolutionize energy production in this country. It may also do the same in China. For China to reach its potential, though, it will need foreign help. U.S. oil companies could furnish some of that capital and technology, giving those enterprises greater business ties and the chance to better China both economically and environmentally.


EnergyBiz Insider is the Winner of the 2011 Online Column category awarded by Media Industry News, MIN. Ken Silverstein has also been named one of the Top Economics Journalists by Wall Street Economists.

Twitter: @Ken_Silverstein

energybizinsider@energycentral.com

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