Report finds China's industry has 'ample room to grow' short term

As China's air quality continues its drastic deterioration, the country is sparing no effort in looking for ways out of the dilemma. A recent report shows that natural gas, which is much more efficient and emits much less greenhouse gas compared to the coal that China primarily relies on, may hold promise.

The report, released Monday in Washington by the Hong Kong-based think tank China Energy Fund Committee (CEFC), gathers views of leading Chinese energy experts from survey responses as well as analytical articles.

"This report confirms China's earnestness in substituting coal with natural gas, a much cleaner and efficient fuel, in her energy consumption profile, mainly through increased domestic production of conventional natural gas and importation," said CEFC's deputy chairman and secretary general Ho Chi-ping, chief editor of the report.

China's commitment to increase natural gas consumption, its radical reform of the gas pricing system, and the re-confirmation by the Third Plenum of an overall open market economy have jointly convinced Ho and his colleagues working on the report that China's natural gas development "has ample room to grow in the near future".

According to Chen Weidong, chief energy analyst with China National Offshore Corporation, the Chinese are inspired by the success of the US' shale gas revolution, which had three phases: First, reducing the cost of extracting shale gas sources through technology; second, spreading the technology and increasing production by attracting investment; and finally, seeking sustainability.

According to Chen, the latest numbers show that about 15 percent of the investment in America shale gas development comes from both state-owned and private sectors of China. Chen believes that with its ongoing cooperation with the US, China will soon enter the second phase in its own shale gas development.

Edward Chow of the Center for Strategic and International Studies (CSIS) was encouraged by the Chinese experts' optimism in solving the country's environmental problems, as well as their good understanding of how clean energy technologies are developing outside of China.

With "the Chinese oil and gas industry today dominated by three state-owned enterprises, you wonder what are the lessons that will be drawn from North America and be adapted to the Chinese conditions", Chow said. "I'm not saying they will be adapted as a whole, but those lessons are not at all lost.

"No two countries are going to do things exactly the same way, so I think to the extent that foreigners expect China to do things exactly in the way it happened in the US is unrealistic," said Chow, who thought that the Chinese government would have to examine the policy tradeoffs and Chinese businesses also would be pushing from their end as they pursue economic opportunities.

Chow Chuen-ho, professor of geography at Hong Kong Baptist University, however, argued that the shale gas revolution was more of a "hype promoted by the help of mass media" than a real revolution.

From an academic point of view, Chow believes that the process of extracting shale gas creates a high possibility of causing ground water pollution, which he said gets serious five to 10 years into an operation. When the environmental problem gets public attention, "that will retard shale gas development anywhere", he said.

Deng Xianlai contributed to the story.