Water Scarcity as Shale Gas Production Obstacle

China Holds the Largest Reserves of Shale Gas in the World, but Much of It May Never Get Developed Because of Water Shortages

Anew reportfrom theWorld Resources Institute(WRI) says China suffers from high water stress, which may prevent it from ever fully developing its vast shale gas resources. China is sitting on 1,115 trillion cubic feet of technically recoverable shale gas resources, according to theU.S. Energy Information Administration, but much of it is located in arid areas of the country.

This presents an acute problem for a country that may see its natural gas consumption more thantripleover the next 25 years.

China has not yet succeeded in producing its shale gas resources on a large scale, but the central government is putting a lot of effort into developing the expertise needed to economically extract natural gas. For several years now it has invested in North American shale gas companies, such as China National Offshore Oil Corporation's (CNOOC)$2.1 billion investmentin Chesapeake Energy back in 2010. A few months later, PetroChina spent$5.4 billionfor a stake in Encana, a large shale gas producer in Canada.

Both moves were seen less as a financial investment and more as an effort to learn the secrets of the North American shale gas revolution.

To be sure, exploration in China is already underway. Much of the drilling thus far has taken place in the Sichuan basin in central China, with over100 wells drilled to date. WRI says that Sichuan basin is in an area experiencing "medium to high" water stress.

Worse, nearly the entire extent of the Tarim basin, another promising shale gas region in the northwestern province of Xinjiang, suffers from "extremely high" water stress. The dusty region has groundwater shortages, and many of its feeble rivers dry up during certain times of the year.

Source: EconoMonitor

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