China is the world’s second largest economy with a voracious thirst for energy. Its embrace of shale gas may depend upon how the gas industry behaves in the United States – and in particular, in the “Saudi Arabia of natural gas” – Pennsylvania.
Why? Because of the problems and the players.
Environmental impact has complicated shale gas development in China. Water shortages are already a challenge. Even though China’s environmental regulators are relatively weak and underfunded, China may prove to be to be stricter on water issues than U.S. regulators; the government has a history of shutting down factories or forbidding certain production practices because they use or contaminate too much water. Air pollution, already severe in China, is another complicating factor for gas production.
And then there are the players. China’s major state-owned energy companies are new to the shale gas industry, so they are teaming up with major international companies for shale gas exploration: Chevron, Shell, BP, EOG Resources, Newfield Exploration, ConocoPhillips, Schlumberger, and Baker Hughes. All of those companies are active in the Keystone State. So, the industry’s performance here – particularly its consumption of water and its potential for pollution through leaks and spills (and perhaps - or not - from fracking itself) – will be closely scrutinized by Chinese officials.