Shale Gas Revolution and China Joined

When Donald Trump entered the White House in January, he promised to ‘embrace the shale oil and gas revolution’, and indeed it does continue to thrive. In 2016, the US shale gas boom led to 275 new chemical production plants, of which 40% were completed or under construction by the end of the year, and 60% of the proposed $170 billion investment came from foreign sources. By comparison, 318 chemical industry projects due to shale gas had been announced as of late November 2017. These are valued at $185.5 billion, and just about half have been completed or are under construction. However, not all the projects have survived – South Africa’s Sasol has decided to abandon a proposed US gas-to-liquids plant.

Around 62% of this announced investment came from outside the US, and that looks set to continue, with significant interest from China. When Trump and Chinese president Xi Jinping met in China in November, two deals were reached between Chinese entities and the US states of West Virginia and Alaska.

The International Energy Agency (IEA) predicted in November that the shale revolution will help the US become the world’s largest exporter of liquefied natural gas by the mid-2020s. ‘A remarkable ability to unlock new resources cost-effectively pushes combined US oil and gas output to a level 50% higher than any other country has ever managed,’ the IEA concluded. The agency estimated that the 8 million barrels per day rise in US tight oil output from 2010 to 2025 would match the highest sustained period of oil output growth by a single country in the history of oil markets.

The agency said this rapid expansion is having wide-ranging impacts within North America, fuelling major investments in petrochemicals and other energy-intensive industries. It is also reordering international trade flows and challenging incumbent suppliers and business models.

China Moves in on US Shale Gas

The attractiveness of US-based shale gas to China is evident in two deals brokered between Chinese entities and the US states of West Virginia and Alaska, when US president Donald Trump and Chinese president Xi Jinping met in China on 9 November. Both states are home to large shale gas reserves, and the agreements are part of the business exchange trade mission that aims to enhance relations between China and the US.

China Energy, recently formed through a merger of state-owned coal mining company Shenhua Group and energy producer Guodian Group, plans to invest $83.7 billion (£185 billion) in shale gas development and chemical manufacturing projects in West Virginia. These projects will proceed in phases over a 20-year period, and will focus on power generation, chemical manufacturing, and underground storage of natural gas liquids and derivatives. The West Virginia department of commerce noted that the plans demonstrate ‘a total value chain approach’, integrated from raw materials through to local production of useful chemical intermediates.

Meanwhile, an agreement between China’s state-owned oil company Sinopec, the Alaska Gasline Development Corporation, the state of Alaska, a Chinese bank, and a Chinese investment firm to advance the $43 billion Alaska LNG natural gas pipeline megaproject. The LNG project aims to move natural gas from Alaska’s North Slope to its southern coast, where it would be liquefied and exported. The goal is to firm up project plans by the end of 2018, and begin production in 2024–5.