China Moves Into North American Gas Market

The Wall Street Journal reports that China is moving aggressively into the North American gas market.

Technological advances have opened up massive new gas fields in North America, creating opportunity for Asia's energy-hungry countries. The technology taps gas trapped in rock, called shale gas. Energy consulting firm Wood Mackenzie Ltd. estimates that potential U.S. shale-gas resources total 650 trillion cubic feet. By comparison, proved U.S. gas reserves at the end of 2009 totaled 244.7 trillion cubic feet, according to the BP Statistical Review.

Asian companies are looking to tap these resources and know-how. Chinese companies have been the most aggressive to date, signing joint ventures in the U.S. and China as well as supply agreements. PetroChina Co. (NYSE: PTR - News) said last week it will pay US$5.4 billion for a stake in Calgary-based Encana Corp.'s shale and deep-well gas assets. This follows a shale-gas deal between China's Cnooc Ltd. (NYSE: CEO - News) and U.S.-based Chesapeake Energy (NYSE: CHK - News) Corp. in January. Bankers expect similar deals this year as China continues to seek energy security and reduce its dependence on dirtier coal.

China is looking for energy supplies, but it is also trying to learn more about the advanced drilling and production techniques that have unlocked some gas reservoirs that were not cost-effective to develop.

Bankers say the price may be worth it. The deals could potentially let the Chinese buyers learn new techniques to get at hard-to-reach shale gas by explosive or hydraulic force, known as fracking.