Natural gas boom’s future may be in China

07/08/2014 4:11 PM

07/11/2014 11:37 AM

China is expected to double its demand for natural gas in the next five years, representing an irresistible market for Western companies attempting to export America’s energy bonanza as well as to exploit China’s own vast reserves.

Chinese cities are choking in smog, and its government is intent on moving the country away from coal to cleaner-burning natural gas, said Anne-Sophie Corbeau, a senior gas analyst for the International Energy Agency.

“This is becoming priority number one,” Corbeau said Tuesday, as she presented the agency’s forecast at the Center for Strategic and International Studies in Washington.

Western energy companies are hoping to cash in by sending American natural gas overseas. BP last month signed a $20 billion deal to send liquefied natural gas in tankers to China starting in 2019, with much of the supply expected to come from a proposed export plant in Freeport, Texas, awaiting federal approval.

Numerous other companies are also hoping to ship American natural gas overseas. But U.S. natural gas exports are controversial, and Australia and Russia have a head start in helping fill the lucrative Chinese market.

China recently signed a $400 billion deal to buy natural gas from Russia’s Gazprom, and Australia has seven high-priced facilities under construction for the liquefaction and export of natural gas in tankers.

“There is, despite all the talk, only one single project in the U.S. under construction,” Corbeau said.

The International Energy Agency expects the global liquefied natural gas market to grow by 40 percent in the next five years, with half of all new exports coming from Australia. North America is expected to account for about 8 percent of the global trade in that time.

There’s a backlash against the growing push to send American natural gas overseas. Some manufacturers argue it could have the potential to raise U.S. energy costs. Environmental groups say it would encourage more fracking, in which water and chemicals are pumped into shale rock to release natural gas, resulting in more planet-warming gases.

Opponents of the proposed Cove Point export facility in Maryland are staging a protest in Washington this weekend, saying the facility “could incentivize a dramatic expansion of fracking activities.”

Natural gas produces half as much carbon dioxide as coal when used to make electricity. But a new Department of Energy report suggests that the greenhouse gas benefit could be offset by the methane leakage and energy needed to drill for natural gas in the United States and then ship it in tankers to China.

In addition to importing natural gas, China is aggressively seeking to drill its own energy reserves. The IEA forecasts that half of China’s new natural gas demand will be met through the country’s resources.

China has large natural gas reserves in shale rock, but it has struggled with efforts at fracking to harvest it.

FTS International, a major fracking service provider based in Fort Worth, Texas, last month announced that it signed a 15-year joint venture with the Chinese state-owned company Sinopec, the first such collaboration of its kind aimed at developing Chinese shale.

A major question is whether China can draw on U.S. technological efforts to reduce the enormous amount of water needed for fracking, said Jane Nakano, a fellow in the energy and natural security program at the Center for Strategic and International Studies.

International Energy Agency natural gas specialist Corbeau said it’s an open question whether China is able to successfully use fracking to harvest its shale gas.

“It’s really a question of faith. Are they going to achieve the same miracle as the U.S.? We’ll see,” she said.

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