The American Interest
Analysis by Walter Russell Mead & Staff
China's Shale Boom Still a Long Way Off

Preliminary signs suggest that China is sitting on the world’s largest shale gas reserves, but the motley crew of firms that recently won exploratory drilling rights all lack that one crucial bit (pun intended) on their resume: none of them has drilled a gas well before. Reuters reports:

China’s potential is clear. The government puts technically recoverable shale gas reserves at 25 trillion cubic meters, while the U.S. Energy Information Agency has them at 36.1 tcm, in both cases larger than U.S. reserves estimated at 24.4 tcm. [...]

The [recent] auction attracted interest from more than 100 firms, an eclectic group that included a real estate developer, a grain trader and a tobacco dealer, lured by gas subsidies and aided by easy access to funds. [...]

 The lack of experience exploiting shale among new firms scrambling to enter the sector will make it an even bigger challenge to get at the gas, and if they fail to deliver China will struggle to reduce its dependence on expensive imports of oil, liquefied natural gas and coal.

There is a vast gulf in technological capability between US and Chinese firms, but that’s not the only thing keeping China’s shale gas in the ground. The US benefits from a kind of “wedding cake” stratigraphy, where the horizontal layers of shale are arranged neatly underground, easily accessed by horizontal wells. Europe, Asia, and California have more faults, which crunch these layers and make their shale more difficult to access. Complicating things further, China’s shale resources are less concentrated and buried deeper.

There’s more. Experts say that most of China’s shale reserves reside in areas where water is scarce. Fracking, the method by which shale gas is extracted, involves pumping huge amounts of high-pressure water into shale to break up the rock and release the resource.

Those are big problems for China’s inexperienced firms to overcome. But at least China isn’t putting up policy barriers to complement its natural ones, as Europe has been so keen to do. For the foreseeable future, the US can rest easy knowing that it reigns supreme over the shale revolution.

[Shale gas road sign image courtesy of Shutterstock]

Published on March 12, 2013 8:52 am