Onshore China

By Philip de Waal, Vice President Asia Pacific, Maxwell Drummond International

When it comes to natural gas production, all eyes of the international energy industry are on the United States shale sector. However, while the industry is watching the US closely, many other regions are positioning themselves to move into the spotlight. Most notably: China.

Shale has become a key area of co-operation for the US and China. After a 2009 visit to Beijing, President Obama and President Hu developed clean energy initiatives including The US China Energy Co-operation Program and a shale gas initiative allowing China to use experience gained in the US to develop its’ own reserves.

China is one of the fastest growing energy markets in the world and the country is planning to make a rapid entrance into the shale game. According to the US Energy Information Administration, China leads the world in recoverable shale gas reserves with an estimated 1,200 trillion cubic feet. Last year, the country released targets for its 12^th Five Year Plan and a top priority is quickly exploiting the resource in Beijing. 15 to 30 billion cubic metres of shale gas production (roughly 5% of all gas production) is expected to be developed by 2020.

China’s push to boost domestic energy supplies beyond traditional sources and importation has been successful in many areas – it is the world’s biggest installer of wind turbines and the biggest builder of nuclear reactors. But whether they can overcome the hurdles associated with shale gas exploitation? It remains to be seen.

First issue is the lack of technical knowledge required for the development of shale fields. The region can look to the International Oil Companies already in play there, such as Shell and Hess, to acquire this, as well as continue to invest in US shale plays. China’s top three oil majors have all made significant investments in US shale gas assets in the last 12 months, such as those of Devon Energy and Chesapeake Energy’s stake in Colorado and Wyoming acreage, with a goal of obtaining knowledge and technical skills to help in the development of their home country’s resources. Talent shortages will no doubt plague the nation as well. Companies with plans to operate in the region, and those that already, must be proactive in their recruiting efforts and develop talent management strategies that bring in a workforce with the technical know-how the country so desperately requires. Further hurdles to overcome will be the publics’ negative perception of the methods used to extract reserves, as well as the country’s water scarcity, brought on by droughts the country faces in the Northwest and Central North basins, which hold three of the four major shale basins.

Once the country has developed solutions to these obstacles, it will truly become a major onshore player.

About the author
Philip de Waal was appointed as Vice President Asia Pacific for Maxwell Drummond in September 2011. He joined the Houston office of Maxwell Drummond in 2007 as Business Development Manager. From September 2007 until August 2011 he established a presence for Maxwell Drummond in Africa by opening an office in Johannesburg.

Maxwell Drummond International is a world leading retained search consultancy offering professional search services to clients in all sectors of the energy and natural resources industries.