The Wall Street Journal reports:
When Royal Dutch Shell RDSB.LN -0.88% PLC began a multibillion-dollar effort to tap China shale gas a few years ago, it seemed like a can’t-miss wager. China has the world’s most extensive shale gas reserves, biggest energy market, and a government pushing for expanded gas production.
But for Shell and its state-controlled partner, China National Petroleum Corp. the reality on the ground makes its bet look riskier.
The region’s rough terrain, poor infrastructure and deeply buried gas formations present tough technical challenges. The area is so densely populated and intensely farmed that drilling sites are being built within 360 feet of homes in villages like Maoba—upsetting residents who complain of noise, dust and environmental concerns. To ease the way, Shell and its partners are compensating local residents and local government officials for using their land and roads and other inconveniences.
Shell’s experience in China, where it is charging ahead faster than competitors, shows how replicating the U.S. shale boom won’t be easy. While other countries have shale gas—China, Argentina and Algeria have bigger reserves than the U.S., according to the U.S. Energy Information Administration—a range of obstacles make tapping those resources far tougher than in places like Texas and Pennsylvania.
Some shale-rich countries, including China, are short on developed roads, water and drilling contractors trained in modern safety standards. Others like France and Bulgaria have put up legal barriers to the hydraulic fracturing needed to extract shale gas.
And unlike in the U.S., where landowners generally own rights to gas beneath their property, minerals in many countries are owned by the state, giving residents little financial incentive to support drilling near their homes.
Heh. Turns out that private property and good infrastructure matter. Who’da thunk it?
Oh, yeah, anyone who’s read Adam Smith or the Federalist papers. That’s who. Meaning not Obama and not the Chinese leadership.