China Going For Knowledge Investment To Gain Shale Gas Exploration Expertise

July 31, 2012 - PRLog -- China has claimed to have found the world’s largest shale gas reserves of the order of 1,275 Trillion Cubic Feet, about 50% more than the current shale gas leader and pioneer, United States of America. The development of shale gas is still in its nascence in China but nonetheless growing at a fast pace. What China lacks is the technical knowhow of the process of shale gas production which is somewhat different than conventional gas production. Shale gas exploration and production is a new technical chapter, which North American companies have mastered. China is slowly inching towards taking a lesson or two from the pioneers with the classic investment formula. The government has given priority to shale gas development to achieve its energy security, due to which the companies have the arduous task of learning the traits of the new technology. The Chinese national companies are sparing no expenses, literally, to learn the nuances of the technology required for shale gas production.

The Chinese national oil companies are taking the partnership way to gain the technological expertise in shale gas development. Hydraulic fracturing or Fracking, as the technology is called, is more expensive and complex than conventional technology, thus, making it imperative for China to learn it rather than develop by itself. These companies are seeking North American shale gas expert companies to partner with them and thus enter the already operational shale gas development arena. This is being termed as China’s knowledge investment. The companies are building relations with the American companies and are buying stake in the companies to help their citizens get the knowledge. Chinese government is seeing Shale gas development as its one chance to be energy secure and money is least of its concerns.

China has in all spent about USD 13 Billion in the various mergers and acquisitions done for shale gas reserves in North America.    Sinopec has invested USD 2.2 Billion in Devon Energy to develop its five shale gas blocks in Tuscaloosa, Niobara, Mississippi, Ohio Utica Shale and Michigan basin. China National Offshore Oil Company (CNOOC) had bought 33% stake in the Texan project called Eagle Ford from Chesapeake Energy in 2010 for USD 1.1 Billion. CNOOC and China Petrochemical bought 30% equity in FTS International for a whopping USD 2 Billion. Another 33% was acquired from Chesapeake Energy by CNOOC in the Wyoming and Colorado shale projects. These were the American companies that China has invested in to gain the knowledge of shale gas development in the heart of the birthplace of shale gas.

China is also investing in Canadian shale gas companies, a USD 5.4 Billion deal with Encana Corp. This is the biggest investment by China in any Canadian venture. PetroChina inked this deal with a two point goal, one to acquire foreign assets, beyond the United States and the second, to gather the technological intelligence from a resource other than America. There is not a lot of difference in the technologies used but the management policies are certainly different, giving China a larger resource base to develop its own policies, which as of now have been at infancy.

A recent research report “China Shale Gas Market Analysis ”published by KuicK Research details how these investments will help China gain a stronger foothold in the shale gas development. It also suggests that these are strategic moves that will benefit China in the near future with the American companies also partnering in the development of Chinese reserves. The investments are being done only for gaining the technical expertise and learning the art of sound management so that China can develop its valuable resource with the help of the best of industry practices. The report presents a detailed view of the initiatives that China has taken to gather knowledge and businesses outside the country to achieve its target of producing 6.5 Billion Cubic Meters in 2015 and 80 Billion Cubic Meters in 2020.