Shale Gas Race

The shale gas revolution in the United States has led to a debate in China over shale gas development. But can the United States really achieve energy self-sufficiency? And if it can, what are the implications for China?

Ever since the Nixon era, almost every American president has discussed energy self-sufficiency. Some have even taken practical steps in that direction. While most countries have taken very little heed of this trend, China has taken even less. So why have business and government circles in China come to discuss it this year? The answer is: Because China has also started to pay attention to the question of energy security.

China has already become the world’s second-largest economy, the world’s greatest consumer of energy, and the world’s second-largest importer of petroleum. After thirty years of reform and opening, China has become deeply entrenched in the global economy.

In recent years, the government has been loudly calling for “free trade,” especially in the wake of the 2008 financial crisis. In fact, some would say the Chinese government is now the world’s greatest advocate of free trade. In the energy sector, however, Chinese views on “free trade” are still quite muddled.

We hope to “freely enter” nations and regions rich in petroleum resources, to participate in the development of those places’ resources and to enter their local markets. And we want to maintain the monopoly on the resources and markets within China. We do not wish to lose control.

We know that the United States is the current maintainer and leader of the international petroleum system. While a stable international petroleum market is beneficial to guaranteeing China’s energy security, China has no faith in this system led by the United States, nor is China willing to participate fully in this system.

Even though China cannot fully extricate itself from this system, it still hopes to distance itself as much as possible. Until now, I thought this was a major reason that China to this day still has no plans to make its own global energy strategy.

We understand that the United States’ presence and influence in the Middle East is a key factor behind that region’s stability. But China is the single greatest purchaser of Middle Eastern oil. The major reason that the United States is seeking energy self-sufficiency is its desire to reduce or even end imports of Middle Eastern oil.

<p.American neoconservatives are the most outspoken advocates of American energy self-sufficiency. Their most important reason for not wanting to buy Middle Eastern oil is their wish to “not subsidize terrorism.” The logic goes like this: If the United States buys large quantities of Middle Eastern oil, the dollars they pay may pass into the hands of terrorists. Only by not purchasing oil from that region can they eliminate the possibility of supporting extremists, force Middle Eastern countries to reform their societies and become modern democracies, fundamentally remove the threat of terrorism, and dispel the largest uncertainty to American security.

We Chinese do not concur with the logic of American neoconservatives at all. Nor do we wish to see the United States completely withdraw from the Middle East. We really don’t want to see the Americans “transform” the Middle East or allow the region to fall into disorder once they are no longer reliant upon its petroleum. China has but little influence on the Middle East and even less power to control the region, but we need its oil, and we need a stable Middle East.

The discoveries of American shale gas, Canadian oil sand, and Brazilian oil beneath salt beds has turned the Americas into the “new Middle East” of the 21st century. In the foreseeable future, it is entirely possible for North and South America to become energy self-sufficient. In other words, the Middle East would no longer be an indispensable source of oil to the United States.

In the first half of this year, U.S. dependence on foreign oil fell below 50 percent for the first time in fifteen years. The United States now imports only 15 percent of its petroleum from the Middle East. The American energy independence sought by U.S. neoconservatives is now technologically and economically possible.

And the United States, which has always sought dominance of geopolitical controls and leadership of the entire world, will not allow control of world energy resources to fall into the hands of another nation. The Middle East is home to over half of the world’s oil reserves and a third of global oil production, and it occupies an extremely important strategic position. The United States will not give up the Middle East.

After decades of hard work, the United States has finally seen transitions in its energy supply that will guarantee it more energy autonomy and more reliable energy safeguards. It has gone from a net importer of natural gas to a net exporter. It now imports most of its oil from the greater Atlantic region and from a greater number of more diverse nations, and its overall dependence on foreign oil has decreased.

We in business, academic, and government circles in China must seriously study the reasons and motivations behind the Americans’ achievements in energy. We must place more emphasis on the creation of institutions and systems that encourage innovation, and we must increase the efficiency of resource development within our own borders. This is of utmost importance.

Chen Weidong is the lead researcher at CNOOC’s Energy Research Center.