China’s Shale Gas Push Could Be Huge for U.S. Companies

July 25, 2014

Halliburton recently signed an agreement with an affiliate of China's SPT Energy Group to establish a joint venture company focused on hydraulic fracturing and production enhancement services in Xinjiang. Last year, Schlumberger (NYSE: SLB  ) opened a reservoir laboratory in China to offer rock analysis services to support expanding exploration in unconventional shale plays. China has vast shale gas resources; however, the country lacks the technological expertise to develop these resources.

At the same time, China is looking to increase the share of natural gas in its energy mix. Indeed, shale gas can aid China's shift to natural gas from coal. And the likes of Halliburton and Schlumberger, with their technological expertise, can play a major part in developing China's shale resources.

According to estimates from the U.S. Energy Information Administration (EIA), China has 31 trillion cubic meters of recoverable shale gas. This is the largest for any country in the world. However, China's production was just 200 million cubic meters in 2013, accounting for 0.2% of the country's total natural gas production. In contrast, the U.S. produced around 300 billion in 2012, according to the EIA.

Environmental issues have forced China to cut its reliance on coal to meet its energy needs. In 2011, natural gas accounted for 4% of total energy consumption. The Chinese government expects to boost the share of natural gas to around 8% by end of 2015 and 10% by the end of 2020. The International Energy Agency (IEA) notes that Chinese gas demand could almost double to 315 billion cubic meters a year by the end of this decade. With this in mind, China recently inked a major gas deal with Russia.

However, the country is also looking to boost domestic production, and shale will certainly play a major part in this. In fact, shale could meet between a fifth and a third of China's gas demand if government targets are achieved. China is certainly making an effort to reach its targets.

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