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China's Natural Gas Ambitions

Keith Kohl

Written By Keith Kohl

Posted April 26, 2013

Two years and two billion dollars.

That’s what’s about to be invested in China’s shale patch by Royal Dutch Shell. The new venture with China National Petroleum Corp. (CNPC) will take place in 2013 and 2014 in the Sichuan Basin.

It’s all too easy for them to get worked up over this project. After all, China holds a jaw-dropping 1,275 trillion cubic feet, which makes our vast shale resources look trivial.

But this promises to be a slow process. China hopes to produce a little over 6.5 billion cubic meters per year by 2015 — a lofty goal considering the country’s first two shale wells are expected to be put into production this June.

All I can say is it’s about time they made a move in their own backyard, given the billions of dollars the country has dumped into U.S. and Canadian shale projects.

And if you think that production target by 2015 is ambitious, China is expecting shale gas production to grow as high as 100 billion cubic meters per year by 2020.

Are they on a fool’s errand? They just might be.

The reality is potential shale plays in other countries have all but fizzled…

It Doesn’t Work for Everyone

Countries are dropping out of the global shale race like flies.

The feverish excitement in Poland over shale gas resources has dulled as of late, and with it the country’s hopes of finally unshackling its dependence on Russia for natural gas supplies. You might  remember last year when the company reported the Eastern European country’s shale wasn’t responding well to hydraulic fracturing.

(Note: Our addiction to OPEC oil is nothing compared to Poland’s situation. The consequence of us losing a few Saudi barrels of oil simply means we’ll cut back our driving a little. If Russia were to cut the gas supply, as it has in the past, it would be devastating during the Polish winter.)

Exxon’s failure to successfully tap into Poland’s shale doesn’t give us much hope that a shale boom is on its way.

So you can imagine my lack of enthusiasm when news came out that China is finally ready to put a shale well into production.

And maybe I was the only skeptic in the bunch. Because the question that kept flooding my inbox from readers was how best to take advantage of China’s newfound love for natural gas.

I have a better question: Why?

Why invest in China’s shale development?

I want to be sure we recognize the fact that China’s shale gas aspirations rest squarely on the shoulders of huge Western energy companies like Shell. Even their aggressive $2 billion drilling program doesn’t get me excited to invest in this play…

Chevron, for example, drilled its first shale well in China last year and are planning another three in the future. That’s four wells in two years!

This is just one reason I prefer to stick with the U.S. when it comes to natural gas profits — and so should you.

Look, we all know there’s a better way to invest in shale than betting on China’s ability to pull off a miracle…

We’re decades ahead of the Chinese on the nat gas front. North American companies have been cracking the shale code since George Mitchell began tinkering with ways of extracting shale gas deposits in Texas during the 1980s. And for the most part, we’ve worked out the kinks.

If you want to see how lucrative the right natural gas players have been over the past year, just compare the performance of the supermajors versus our homegrown U.S. plays…

The returns aren’t even close for individual investors like us.

I’ll let you decide which proved more valuable:

COG VS RDS

Cabot’s first quarter earnings doubled on the back of its natural gas production!

And while Shell and CNPC are crossing their fingers in the Far East, companies like Cabot are utilizing advanced drilling technologies in U.S. shale plays. Just one of their well pads in the Marcellus is producing more than 47 Mmcf per day.

This is the kind of success we’ve come to expect from our shale players.

Until next time,

Keith Kohl Signature

Keith Kohl

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A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.

For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.

Keith’s keen trading acumen and investment research also extend all the way into the complex biotech sector, where he and his readers take advantage of the newest and most groundbreaking medical therapies being developed by nearly 1,000 biotech companies. His network includes hundreds of experts, from M.D.s and Ph.D.s to lab scientists grinding out the latest medical technology and treatments. You can join his vast investment community and target the most profitable biotech stocks in Keith’s Topline Trader advisory newsletter.

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