“The lack of a national pricing structure is creating uncertainty among potential investors” in China’s shale gas and has held up development, said Mr. Xu. Also, “Chinese restrictions on foreign investment could hamper growth” if Chinese firms are unable to innovate their way around the problems and need assistance from foreign investors.
He predicted that it will take “an extended period of time” to overcome the obstacles and bring China’s shale gas to market.
The London think tank GlobalData also has concluded that China’s plans to develop its shale are overly ambitious, given the many obstacles.
“Water shortages are a major issue in China,” it said in a report, while “Chinese shale gas companies cannot currently use the high performing drilling technologies used to extract shale gas in the U.S.” and will need further research to adapt U.S. drilling methods to China’s geology.
Keeping up with the U.S.
The United Kingdom, France and Norway also are tapping into the U.S. shale revolution with the goal of transferring the technologies to Europe and the rest of the world.
Norway’s Statoil ASA, Europe’s second-largest natural gas producer, and British Gas have teamed up with Chesapeake to develop Pennsylvania’s Marcellus Shale. Britain and Norway have considerable oil and gas resources, although their conventional reserves are depleting quickly.
Chesapeake co-founder Aubrey McClendon had high hopes of “exporting our world-class unconventional natural gas technology” when he signed the $3.8 billion deal with Statoil in 2008, but prospects for developing sizable shale deposits in Europe have dimmed since then.
Environmental opposition to shale development is much stronger in Europe than in the U.S., with worries about groundwater contamination and other side effects. Several countries — including France and the Netherlands, which have some of the most promising shale fields — have banned fracking.
Poland has been eager to develop alternatives to imports of Russian natural gas, but has had less success than the U.S. at developing shale reserves.
For countries that are open to shale development, getting some schooling through involvement with U.S. projects appears to be an important prerequisite. In all, foreign oil firms have invested more than $28 billion in U.S. shale projects since 2008, often paying dearly to become passive partners whose main function is to provide the cash needed to cover a share of the drilling costs.
“While foreign companies may pay sizable initial costs through joint ventures, these deals can be considered a cost of entry to the development of hydrocarbons through the latest technology,” said Aloulou Fawzi, shale analyst at the U.S. energy agency. For China in particular, “this is an opportunity for them to transfer this technology and to have a partner who has the skills to help them catch up.”
Consumers of natural gas also want some of the action. Japanese companies such as Mitsui & Co. Ltd., Sumitomo Corp. and Marubeni Corp. have been the largest foreign investors in U.S. shale drilling, putting more than $5 billion into a range of projects.
Mr. Fawzi said Japan, which lacks resources of its own, is seeking to replace its nuclear power plants after the Fukushima disaster with other fuels. It may be in the game partly to position Japan favorably as it seeks to become the largest importer of shale gas from the U.S.
Despite much foreign interest in the U.S. boom and large estimated shale resources on other continents from Australia to Argentina, analysts say, the lags in technical know-how overseas, differences in geology and less drilling-friendly governmental regimes mean that shale development overseas will take a lot more time than it has in the U.S.