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Drilling Difficulties
China Halves 2020 Shale Targets

China cut its 2020 targets for shale gas development in half this week, dealing a blow to an energy source that is seen as both a solution to the country’s toxic smog problem, and as a way to boost Chinese energy security.

Like many countries, China has set out to replicate America’s astonishing success developing shale oil and gas. It’s sitting on the world’s largest reserves of shale gas—nearly double America’s reserves—and the world’s third largest reserves of tight oil. But the country’s geology is more “crunched” than America’s, making it more difficult to predict where to drill, and take advantage of horizontal well drilling. But, as the FT reports, there are plenty of hurdles above ground, as well:

The expansion of China’s gas sector is a huge logistical and capital investment challenge. Supply availability and delivery infrastructure, pricing levels, and government policy and funding to promote natural gas over other fuels are other factors dictating the speed at which the switch occurs. […]

“There is a lot of Chinese pent-up demand, particularly over the last decade, but infrastructure and the availability of supply has always been a constraint,” says Michael Stoppard, gas strategist at IHS. “They really haven’t been able to develop the gas quickly enough.”

This isn’t good news for China’s smog-choked megacities. Much of the country’s urban air pollution can be laid at the feet of its coal-fired power plants; natural gas can displace coal as an energy source, and in that way can help clear China’s skies. That logic surely factored in to the finalization of a long-negotiated gas deal with Russia earlier this year, and it’s pushed Beijing to set aggressive shale drilling targets. Underperforming exploratory wells are a drawback for China’s environmental health and energy security alike.

China’s shale struggles are a foil to America’s oil and gas boom, and once again remind us of how unique—and how spectacular—this recent revolution has been for the U.S.

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