For the last few months, we’ve talked about China’s growing affinity to natural gas, particularly the unconventional variety.
Ever wonder why the Chinese have been investing so aggressively in U.S. and Canadian shale plays?
Trust me, you don’t spend billions of dollars investing in someone else’s backyard on a whim.
But China has good reason. Actually, they have 1,275 trillion good reasons…
That’s how many cubic feet of natural gas are tucked away under Chinese soil:
The problem for the Chinese isn’t the quantity of gas, but rather how they plan to develop it.
By offering a helping hand to North American gas companies, China gets a much more valuable reward: technology.
Because what’s worse than the stress of securing energy for billions of people with an insatiable demand appetite… is having all that gas at your fingertips and not being able to extract it.
That’s precisely the bad news Exxon Mobile Corp. gave the Middle Kingdom recently.
You see, one of the reasons shale gas production in Canada and the U.S. has been so successful is developers are utilizing drilling techniques like hydraulic fracturing.
Without the ability to fracture the rock, you can’t produce the gas.
China was hoping they could use similar techniques to unlock their own resources…
Unfortunately, they can’t — at least, that’s what Exxon’s top exec said earlier this week.
Apparently, some of the formations in China and Europe have proven impervious to these drilling techniques.
Now their only hope of tapping into this massive resource is to go back to the drawing board and come up with a new method to reach the trapped gas.
That could take years, maybe decades… and that’s assuming a breakthrough even happens.
This setback couldn’t have come at a worse time for the Chinese. Their natural gas imports in January were 66% higher than the year before.
This also means natural gas companies will be lining up to turn China’s geological misfortune into a cash cow.
Not surprisingly, the smart money understands exactly where China will have to go for their gas supply…
Until next time,
Keith Kohl
Editor, Energy and Capital
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