China's Solar Industry Gathers as Gloom Deepens Over Demand
China's despondent solar manufacturers face a new threat — an imminent drop-off in demand for their products that's likely to heap pressure on an already oversupplied market.
Investors will have an opportunity to gauge the industry's underlying mood amid the glitz of the world's biggest solar fair in Shanghai this week. The conference and exhibition kicks off on Tuesday and typically attracts hundreds of thousands of visitors.
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Why China Is Pursuing Domestic Shale Gas
Drilling operations for the first shale gas development demonstration project in Guangxi are ... More underway in Hedong Village, Liuzhou City, Guangxi Province, China, on June 2, 2023. (Photo by Costfoto/NurPhoto via Getty Images) China is today the world's leading importer of both oil and natural gas, and, by all accounts, it is not happy with the situation. If its demand for oil might be reduced by a surging electric vehicle industry, the natural gas side has a different possible solution. The U.S. Energy Information Administration published estimates in 2015 that show China with the largest shale gas resources of any nation. The figure of 1,115 trillion cubic feet is nearly twice the 623 tcf assessed for the U.S., where the 'shale revolution' began in the early 2000s, transforming America itself from a major importer to the world's biggest exporter in a single decade. Still, the scale of the resource has been confirmed and yearly production, though small by U.S. standards, has grown impressively by more than 20% each year over the past decade. Chinese leaders hoped for a similar transformation when the country's shale gas program began in the early 2010s. Geology and other factors have held this back, moderating Beijing's expectations. Shale got its start in China when companies like Shell, BP, and Chesapeake Energy helped introduce Western knowledge and technology. Through joint ventures, partnerships, and investments in companies active in U.S. drilling, Chinese national firms like Sinopec and PetroChina gained access to valuable expertise. Between 2010 and 2016, drilling established several gas fields and set the foundation for a larger exploration program. Research on individual shale zones and use of updated technology were key parts of this progress. If China is going to win the global race for economic dominance, then shale gas will likely play a crucial role in domestic energy markets. How Shale Gas Differs In China Vs. The U.S. Geology argues that no two shales are alike. This proved especially true in China's case when compared with such U.S. producers as the Bakken Shale in North Dakota and the Wolfcamp shales of the Permian Basin. The highest quality gas shales, found in the Sichuan Basin in the southern part of the country, are thinner, older, deeper, and more highly faulted and fractured. Wells therefore take more time and are more expensive to drill. The technologies used in the hydraulic fracturing process ('fracking') sometimes need to be modified. In some of China's geologic basins located in dry areas, moreover, there are water supply challenges due to the large volumes needed for fracking. Even when everything goes well and there are no 'surprises,' the total amount of gas recovered over time is less than for the average U.S. well. Such comparisons, though, aren't really fair or helpful, given the differences just noted. Moreover, it can't be denied that Chinese companies are still new to the business of drilling the more complex and demanding wells in the Sichuan Basin. Sinopec and PetroChina, the main companies involved in shale development, have taken a measured approach in the Sichuan and other basins as well. Technical reports indicate that around 3,000 shale gas wells were drilled between 2012 and 2022, an order of magnitude less than the dozens of U.S. companies who pioneered the first gas shale play, the Barnett, during its initial five years, 2000-2005. The Future of Shale Gas In China Beijing's plans are for shale gas production to grow from around 0.9 tcf in 2024 to as much as 3.5 tcf by 2040. That is far from making China an exporter, given that it consumed 15 tcf in 2024 and is predicted to increase this figure by 50% or more over the next decade-and-a-half. Yet the growth in shale gas has been more rapid than planned or expected. It now seems possible, given large new discoveries, that it could play a key role in reducing China's import burden going forward. Energy security is therefore a major reason why the government wants to continue expanding the shale gas program. Oil and gas are still strategic resources in today's world, and any powerful state deeply dependent on others for their supply will view this as a national security concern. A second reason for Beijing's commitment has to do with climate change: China's coal use and carbon emissions are both greater than those of North America and the European Union combined. In a manner of speaking, any decision China makes about its fossil fuel use translates as a global impact, positive or negative. Any such decision that significantly reduces coal consumption in particular will reduce emissions. Here is not the place to do a deep dive on the question of China's concern for the climate, but a recent survey by the European Investment Bank shows that 73% of Chinese people feel climate change defines the number one challenge facing society, compared with just 39% in the U.S. and only 47% in Europe. Finally, it can be argued that, from the Chinese point of view, success breeds itself. The shale gas resource is simply too vast to ignore, and concrete results have been better than anticipated. For more than two decades, a central goal of government five-year plans has been to develop China's domestic energy resources. Despite a tentative start, shale gas is now a growing part of the plan.
