RDS to Spend $1 Billion on Shale Gas Development in China

Published on Author tyrrell

China recently discovered that it has the largest shale gas reserves of any country in the world.  Shale gas is a type of natural gas that is trapped within the microscopic pores of shale formations in the ground.  Royal Dutch Shell CEO Peter Voser claims that the oil & gas company will spend $1 billion in the near future to develop China’s massive shale gas reserves in the Fushun-Yongchuan block in the Sichuan basin.  Shell won government approval to set up a joint venture contract with China’s largest petroleum company, China National Petroleum Corp (CNPC).  China is attempting to score hydraulic fracturing technology from Shell, much like when the Chinese wanted automotive technology from foreign firms in American Wheels Chinese Roads.  Drilling for shale gas will also boost China’s economy and create many domestic jobs.  Natural gas currently provides under 5% of China’s primary energy consumption, while coal provides over 70% of China’s primary energy consumption.  But natural gas is a much cleaner source of energy than coal, so pollution will be positively impacted if Shell and CNPC’s joint venture operation is successful and the proportion of natural gas increases.

Source: Bloomberg News

3 Responses to RDS to Spend $1 Billion on Shale Gas Development in China

  1. Where is the gas located? Remember that China is continental is size, and shale formations in western China may be of scant value without many $10s of billions in pipeline construction. In any case, as energy development goes, $1 billion is small stuff, so this sounds like early exploration, a couple steps removed from actual development.

  2. After relatively recent discoveries of shale gas reserves in the U.S., environmentalists and those in the energy field have talked about shifting from coal to natural gas. It burns more cleanly, is pretty cheap, and can alleviate the nation’s dependence on coal. Given the pollution problems Beijing is experiencing, I wonder how the discovery of shale gas will influence the country’s energy portfolio? Will they too shift their focus?

  3. Aside from the pollution issue, with last years price hikes of gasoline (not sure if the future will be as volatile), natural gas as a cheap alternative would be good for business. In Beijing, the gas tax in China makes things hard on truck and taxi drivers.

    I remember reading some of the early developments are taking place in Sichuan (perhaps too far) and Inner Mongolia (more manageable, considering its distance from Beijing). However, this would take a great deal of investment to develop into a commercial industry.