In this testimony, Senior Associate Sarah Forbes describes the state of China’s shale gas industry; governmental policies that will drive its future development in China; the implications of U.S.-China business-to-business partnerships and government-to-government cooperation; and how shale gas development in China and the United States changes the global dynamics of energy security.
Testimony Of Sarah M. Forbes
Senior Associate, Climate and Energy Program
World Resources Institute
HEARING BEFORE THE U.S.-CHINA ECONOMIC AND SECURITY REVIEW
CHINA’S GLOBAL QUEST FOR RESOURCES AND
IMPLICATIONS FOR THE UNITED STATES; CHINA’S PROSPECTS FOR SHALE
GAS AND IMPLICATIONS FOR THE U.S.
Good morning and thank you for the opportunity to contribute to the deliberations of this
Commission. My name is Sarah Forbes, and I am a Senior Associate for the Climate and Energy
Program at the World Resources Institute. I am also manager of the World Resources Institute’s
Shale Gas Initiative.
I am delighted to speak with you today about China’s prospects for shale gas and the
implications for the United States. The United States and China share an interest in the domestic
and international development of shale gas resources. In this testimony I will describe the state of
China’s shale gas industry as well as the governmental policies that will drive its future
development in China. I will discuss the implications of U.S.-China business-to-business
partnerships as well as government-to-government cooperation―including the risks and
opportunities such cooperation could yield. I will also describe how shale gas development in
China and the United States changes the global dynamics of energy security. In conclusion, I will
provide recommendations for future actions Congress and this Commission can take. In the
interest of time, I have limited the scope of my testimony to a discussion of the implications of
shale gas development in China on the U.S. and China.
Considering the speed with which shale gas has shifted the U.S. energy outlook1, this is an
important moment to consider the implications of the development of China’s shale gas
resources. Development of shale gas in China will shift future global energy dynamics. How it is
done will affect the environment and global climate picture. As I describe in this testimony, shale
gas can help improve international energy security by providing an abundant domestic energy
resource and reducing the need for natural gas imports. What role it plays in addressing climate
change will depend in large part on the degree to which shale gas displaces inefficient coal plants
and supplements continued improvements in energy efficiency and renewable energy.
As I start, I would like to emphasize the following key points, which I will describe in detail in
the sections that follow.
1. Current state and future direction of China’s shale gas industry: The shale gas industry
in China is in early development, but the topic has already garnered significant interest from
the national government. The Chinese government is implementing new policies that
support the future development of China’s gas industry broadly, as well as supporting shale
gas research. State-owned and provincial-owned enterprises are conducting exploration and
pilot demonstrations on shale gas in China. Through its state-owned enterprises, China2 is
also investing in shale gas development in the United States.
2. U.S.-China cooperation on shale gas: The global oil and gas industry operates joint
ventures (JVs) to sustain growth and defuse financial risk. The emerging international shale
gas industry will rely on the same tactics, particularly given the current state of the global
economy. In recent years, major investments or partnerships between U.S. and Chinese
companies in the shale gas sector have been used to the near-term economic benefit of both
countries and provide potential for U.S. companies to benefit domestically and abroad.
3. Impacts on the energy situation in China: Shale gas development in China will reduce
natural gas imports, thus improving China’s energy security. Because total natural gas
demand will continue to far outstrip all domestic production for the foreseeable future, any
natural gas from shale in China is expected to be consumed domestically. From an
environmental perspective, the more China can develop energy alternatives to imported oil
and domestic coal, the less pressure it exerts on global energy markets and the global
environment. China’s domestic use of its own natural gas resources would be unlikely to
have an effect on net U.S. energy imports, as the U.S. is projected to domestically produce
sufficient quantities of natural gas to meet its own demand for at least the next 25 years.
Throughout my testimony, I will also emphasize a fourth point that cross-cuts these three themes.
4. Ensuring responsible operations and creating a “level playing field”: Shale gas
development should proceed in China (or any country) with environmentally and socially
responsible operations which are (1) enforced by appropriate laws, regulations, and
standards, (2) realized through implementation of international best practices, and (3) based
on an understanding of the real risks and benefits of responsible deployment (both to
industry and the public). Such approaches drive demand for U.S. products and ensure a
“level playing field” between companies operating in the United States and those in China.
More importantly, they help ensure that any negative environmental impacts associated with
shale gas development in the United States are not repeated elsewhere.