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How Shale Energy Is Bringing America And China Together

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Naomi Rovnik, National Journal

Despite their constant squabbles, there is one area of industry where America and China are tentatively making friends. That is the field of shale energy, where the controversial drilling technology known as “fracking” is used to pump water into shale rocks to remove oil and gas.

Because the US has a huge amount of untapped shale reserves and leads the world in extraction technology, it may be the on the verge of total energy independence.

China also has great prospects in shale, with gas reserves that may even be bigger than the US’s and Canada’s combined. But it lacks the expertise to turn its reserves into energy. So Chinese companies are chasing investments in America’s shale industry to access technology that can help it turn its reserves into energy.

Chinese oil giant CNOOC has spent billions investing in shale projects operated by America’s Chesapeake Energy. And more Chinese companies are marshalling cheap loans from Beijing government-backed banks to strike similar partnerships, according to Bloomberg.

China definitely lacks America’s shale extraction expertise, says Neil Beveridge, a Hong Kong-based analyst at research house Sanford Bernstein. He adds that Chinese companies are pursuing investments in US projects to “access technology and then apply those technologies to China.”

That idea is not guaranteed to work. ”As investors in projects, Chinese companies can attend meetings, see work programs and budgets, and generally access a lot of data,” says Beveridge. But what Chinese companies cannot glean from meetings is the engineering experience that is needed to capably extract energy from shale and that the US has built up over the last two decades.

Fracking is “as much about technique as technology,” Beveridge adds. ”It’s not all about the equipment you use. You need experience. Different rock formations present unique challenges.”

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