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Fracking Revolution May Hurt Russia’s China Ambitions, New Report

Ladka Bauerova, Bloomberg

The fracking revolution may dim Russia’s prospects of finding an alternative market to Europe for its gas as the technique spreads to China, a study found.

Smaller developing countries including Angola, the Republic of Congo and Nigeria also stand to lose billions of dollars in lost revenue as a consequence of the boom in oil and natural gas production, according to the London-based Overseas Development Institute.

The bargaining position of traditional suppliers including members of the Organization of Petroleum Exporting Countries and Russia may be weakened as China exploits its shale resources and reduces gas imports by as much as 40 percent by 2020, the study found. President Vladimir Putin is due in Beijing this month and may complete a 30-year pipeline gas-supply agreement, a deal first mooted in 1997, as the deepening crisis in Ukraine threatens Russia’s market in the European Union.

“The growing production of new supplies of unconventional oil and gas has the potential to shift global power,” ODI analyst Zhenbo Hou, one of the report’s authors, said in a telephone interview from London. “Our analysis suggests that Russia will be hit.”

Production of shale gas in the world’s fastest-growing major economy is expected to reach 60 to 100 billion cubic meters by 2020, while imports will probably decline to 250 billion cubic meters that year, according to the study.

Russia, which depends on oil and gas exports for about 40 percent of its fiscal revenue, will be among the biggest losers, according to the study.

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