As many people know, over the past decade the United States has experienced a shale gas revolution that has beneficially transformed its energy landscape.  In witnessing this transformation, other nations with significant shale resources are understandably interested in pursuing the responsible development of their domestic reserves, and achieving for their people accompanying economic, energy security and environmental benefits.

One of these nations is China, which – according to DOE’s Energy Information Administration – may possess the world’s largest shale gas resource at 1.115 trillion cubic feet.  Although shale gas is still a small portion of the Chinese energy mix and is in the beginning stages of development, the government is anxious to take full advantage of its resource and attain the same benefits for China as those currently being experienced by the U.S.  A thorough understanding of the challenges and opportunities this presents, along with policy, regulatory and technological issues, is a critical element for energy officials both inside and outside of China.

This is where an Office of Fossil Energy (FE)-funded report, “Chinese Shale Gas Policies,” hopes to make a positive contribution.  The study, released yesterday at the China Energy 2020 forum, was researched and written by Columbia University’s Center on Global Energy Policy (the Center), a recognized China energy expert with on-the-ground experience in that nation’s shale gas sector.  The goal of the report is to provide an independent and objective perspective on policy and regulatory changes at national, provincial and municipal levels in China that could accelerate the development of shale gas resources.

Why is the U.S. interested in these issues?  A key reason is succinctly outlined in the new report:  The U.S. and Chinese governments share common interests with respect to shale gas and work closely together on many fronts, a degree of cooperation that is supported at the highest levels.  As the white paper notes, these common interests include:

  • The Chinese government gives priority to the development of China’s shale gas sector to help fight air pollution and reduce reliance on natural gas imports; and
  • The U.S. government supports the sustainable development of China’s shale gas sector for a range of economic, environmental and geostrategic reasons.

In the case of the latter, the report says, Chinese shale development “offers export opportunities” for U.S. companies.  Secondly, it could deliver “global environmental benefits – in particular, lower carbon emissions;” in this regard, U.S. technical expertise could help reduce fugitive methane emissions at production sites, improving the likelihood of global warming benefits from Chinese shale gas development.  Finally, Chinese shale gas “could reduce pressure on global gas markets and, in the long term, reduce China’s dependence” on external sources of energy supply.

The study also notes the two governments share common interests with respect to the U.S. shale gas sector as well.:  “The United States welcomes foreign investment, including in the shale gas sector.  Chinese companies seek opportunities for profitable investments abroad, as part of China’s ‘going out’ strategy, as well as technology acquisition.  The result has been over $8 billion of Chinese investment in the U.S. shale gas sector.”

Recognizing that disagreement over some issues exist in some parts of the overall U.S.-China energy relationship, the report notes that it is generally characterized “by productive activities and common interests.”  It offers recommendations in five broad categories to bring about further progress in the Chinese shale gas sector:  (1) accelerate market-based reforms; (2) provide a clear roadmap for foreign companies; (3) build regulatory capacity; (4) invest in innovation; and, (5) coordinate among ministries.

The study was commissioned by the United States Energy Association (USEA) on behalf of FE’s Office of Oil and Natural Gas.  A working draft of the study is available on their website. The forum where the study was released was sponsored by the Center, the National Committee of U.S.-China Relations, and the China Energy Fund Committee, and featured as speakers David Sandalow, inaugural fellow, Center on Global Energy Policy and former U.S. under secretary of energy (acting); and Zhang Guobao, former vice chairman, National Development and Reform Commission and former director of the National Energy Administration of China.  Information on the forum is available online.