Foreign companies, which were not allowed to participate, must now cut deals with these Chinese firms if they want access.
Pipeline infrastructure could present a bottleneck, too. The United States is crisscrossed with pipelines. In Pennsylvania, Texas and Louisiana, new shale gas production goes into a network developed over decades. China’s network is far less extensive.
That creates a chicken-and-egg problem, said one international oil executive. The Chinese pipeline company doesn’t want to build a new pipeline without knowing whether there will be enough gas to justify it. The oil and gas exploration company can’t know that without drilling pilot wells, and before doing that, it wants a pipeline.
If companies move ahead, constructing drilling pads is also going to mean moving people, and many Chinese communities have been speaking out more than they did when hundreds of thousands were displaced by the Three Gorges dam project. “The habits of the past, when you could just bulldoze a village, are over,” said one oil executive.
Then there are natural obstacles, including the question of whether China’s shale is as rich as initial estimates, which were based on very little data. The organic material left behind millions of years ago has to have been subjected to the right amount of heat and pressure to be turned into methane. If the rock is too soft, hydraulic fracturing might not work so well.
U.S. shale deposits are mostly marine deposits. Five of China’s seven shale basins are lacustrine, derived from lakes. Marine deposits are usually better sources of oil and gas, but there’s no hard and fast rule.
The Sichuan Basin, a marine basin, is believed to hold about a third of China’s shale gas resources, but extensive geological folding and fault lines could make it complex. Other gas reserves in the area have been high in hydrogen sulfide, a poisonous and explosive gas. A 2003 CNPC explosion linked to sulfur dioxide killed more than 240 people.
The Tarim Basin in Xinjiang is believed to be slightly bigger. But it has nowhere near adequate water supplies for fracking.
“Most of China’s areas are facing water challenges, either shortages or pollution,” said Ma Jun, director of Beijing’s Institute of Public and Environmental Affairs. “We don’t want this issue to be further exacerbated.” The Tarim River, he notes, used to drain into a large inland lake, which dried up completely in the 1960s. Large parts of the river, also used to irrigate cotton fields, have run dry too.
Despite the obstacles, most oil experts and industry executives believe China will eventually tap its shale gas resources, even if it takes longer than planned.
“There is every reason for the government to develop more shale resources,” said Zhou, of IHS CERA. But, he added, “the more we look at it, the more unique we realize North America is.”