As China charts its energy future, the country is setting its sights on natural gas. The Chinese government aims to double the share of natural gas in its energy mix by 2015—including unconventional sources like gas from shale and coal-bed methane. Shale gas development in China is still in the nascent, exploratory phases, but estimates place China’s shale gas reserves among the largest in the world.
As China pursues shale gas exploration and development, it could draw some lessons—both positive and negative—from the experience in the United States. Indeed, it is in both countries’ interest that their businesses and governments collaborate to ensure that when and where shale gas is developed, it is done responsibly.
Looking at the U.S. Experience with Shale Gas
U.S. shale gas production has increased nearly 10-fold since 2005, a move that has dramatically altered the country’s energy landscape. This development has helped the country become more energy-independent while bringing jobs and new businesses to local areas. Yet, at the same time, U.S. shale gas exploitation has come at a cost. Shale gas extraction has disrupted habitat, negatively impacted local air and water quality, and created climate change concerns. For example, methane leakage—which often occurs along the shale gas production chain—reduces, and could potentially eliminate, the climate benefits of switching from coal to gas.
That’s why it’s important for the United States and China—two of the world’s major shale gas players—to learn from each other, both to capture additional benefits and overcome the negative consequences associated with the fuel. A recent discussion at the Brookings Institution and accompanying paper, U.S.-China: Moving toward responsible shale gas development, explored this topic. In order to pursue shale gas development responsibly, three issues are emerging as potential hotspots for U.S.-China collaboration—environmentally smart development, energy security, and economy.
Collaborating Across the “3 E’s”
1. Environmentally Smart Development
Generating energy from natural gas emits about half the amount of carbon dioxide as the equivalent amount of energy generated from coal. If the environmental risks such as methane leakage are further researched, mitigated, and managed, natural gas could help both the United States and China transition to a lower-carbon economy. It will also be necessary to effectively address other risks, including water pollution, competition for water resources, and air quality problems.
To further environmentally smart shale gas development in both countries, future collaboration on shale gas should include substantive work on environmental standards for air, water, and climate impacts. For example, both countries should evaluate comprehensive, life-cycle environmental concerns regarding their respective shale gas development.
2. Energy Security
An important reason both the United States and China are interested in shale gas development is energy security. In China, natural gas consumption has outpaced production in recent years, making the country a net importer of gas since 2007. Both the United States and China currently rely heavily on fossil fuels to power their economies, drawing particularly on coal and imported oil, with both countries having similar levels of dependence on imported crude oil.
From a national security perspective, increased domestic energy production in the form of shale gas could decrease dependence on energy imports from unstable regions. In addition, it is uncertain what effect Chinese shale gas production would have on potential U.S. gas exports. However, expected rising gas demand in China could provide opportunities for exports at some point if domestic production is insufficient. Information and knowledge-sharing between the two countries on shale gas development could open up the door for export/import markets as well as further both countries’ national energy security interests.
3. Economic Development
U.S.-China collaboration on shale gas can also explore mutually beneficial economic opportunities. For example, China could provide a market for oilfield services for U.S. companies looking for new market opportunities overseas. This collaboration could also help Chinese companies who are looking to enter new markets, either at home or abroad. To remedy current barriers to business-to-business collaboration, both governments should jointly discuss obstacles to data-sharing, finance, and more. A good starting place would be commissioning a joint report from industry, government, and academic stakeholders in both countries.
Additionally, greater collaboration could facilitate more opportunities for joint U.S.-China research and development. For example, most of the current U.S.-China dialogue on shale gas involves collaboration at the technical level. This practical discussion should evolve into deeper efforts that include exchanges of emerging research and knowledge aimed at solving the unique environmental, financial, and other challenges associated with China’s shale production.
Moving Forward with U.S.-China Collaboration
Whether or not shale gas is developed in China will influence global energy dynamics in the coming decades. But as we’re already seeing with the U.S. experience, how it is developed will impact both the local and global environment.
As two of the leading energy users and producers, the United States and China are in a unique position to work together. Some of the areas ripe for collaboration are already emerging. Now it’s time for the two countries to enhance their discussions and find sustainable solutions to the opportunities and challenges presented by shale gas.