Opportunity, challenges and policy choices for China on the development of shale gas

With the highest shale gas reserves worldwide and huge need for energy, the Chinese government has introduced many incentives to accelerate the development of shale gas, including subsidies and reduction or waiver of the related fees or taxes. However, the challenges posed by a lack of advanced technologies, environmental protection, a shortage of water in quantity and a knowledge of how to develop a good industry-local community relationship are anticipated in the realization of the predicted golden age of the Chinese shale gas industry. Based on the particular situation and available resources in China, and with reference to the experiences in countries with a developed shale gas industry (such as the U.S.A.) and suggestions by the International Energy Agency, recommendations about the choices facing China can be summarized as follows: allowing foreign investors directly to hold exploration and mining rights in shale gas could facilitate the obtainment of advanced technologies; the improvement of the regulatory arrangements related to environmental protection could make developers more responsible; prompting developers to improve their water-use efficiency could help in not worsening the water supply to some extent; and SLO-based mechanism guidance could be helpful in developing a mutual-trust and -benefit relationship between the shale gas industry and the local community.