Obama announces shale gas initiative with China

Chinese President Hu Jintao (L) shakes hands with U.S. President Barack Obama (London April 1, 2009. Xinhua/Ju Peng)

President Obama and President Hu Jintao recently announced a broad agreement to strengthen cooperation between the United States and China on clean energy including a shale gas initiative that states:

Shale Gas Initiative. The two Presidents announced the launch of a new U.S.-China Shale Gas Resource Initiative.  Under the Initiative, the U.S. and China will use experience gained in the United States to assess China’s shale gas potential, promote environmentally-sustainable development of shale gas resources, conduct joint technical studies to accelerate development of shale gas resources in China, and promote shale gas investment in China through the U.S.-China Oil and Gas Industry Forum, study tours, and workshops.

New technology, and techniques in fracturing and horizontal drilling  have made it economically feasible to unlock natural gas from tight shale rock formations. In the U.S. natural gas reserves as increased by approximately 40%, and in Canada,  some  estimates have more then doubled natural gas reserves in Canada. The global impact of shale gas could have far reaching economic, and geopolitical implications.

In the U.S. law makers are currently considering the Natural Gas Act that will increase incentives to use natural gas more in the U.S. transportation network, and power generation. Natural gas is emits 50% less carbon then coal and approximately 30% less then diesel and gasoline. For the U.S., by using more natural gas they can reduce carbon emissions but also leverage domestic supply and supply from Canada thereby reducing their consumption of foreign oil from countries that do not share political interests with the U.S.

A breakthrough in Chinese domestic natural gas reserves could have profound impact on that countries growing need for energy, and displace some coal power generation. China needs all the technical and real world experience the world can offer, and Canadian companies should take initiative to develop this opportunity with China and other nations by co-development and technology sharing. On the government level, future trade missions should include a shale gas / clean energy component.

At the same time, as the U.S. increases domestic natural gas consumption and production, Canada needs to increase the use of natural gas in the Canadian transportation grid and power generation. Even with  an increased domestic consumption, Canada would have a surplus of natural gas available for international export via a planned LNG plant in Kitimat, British Columbia. Despite low natural gas prices, the opportunity in natural gas going forward is very bright and will help reduce carbon emissions as a bridge fuel towards a renewable clean energy future.

White House Press Release: U.S. – China Clean Energy Announcements