Shale gas development in China could displace liquefied natural gas (LNG) imports to China and create pipeline deliveries of gas to South Korea, roiling Asian natural gas markets, according to a report on “The Rise Of China And Its Energy Implications” released by the James A. Baker III Institute for Public Policy on Dec. 2.

“Higher shale gas production displaces LNG and has by far the most impact on LNG,” said Ken Medlock III, the James A. Baker III and Susan G. Baker Fellow in Energy and Resource Economics at the James A. Baker III Institute for Public Policy at Rice University.  “We see gas demand moving higher; and you have a reciprocating impact.  When you have more available domestic supply, you see lower prices and get higher demand in China.”

In running this case, the researchers saw something that was not expected, he continued.  “You see pipeline development into the Korean Peninsula, and you see exports of up to 1.0 billion cubic feet per day into South Korea.  This is a very interesting development because you have more far-reaching impacts on the LNG market because South Korea is a very large LNG importer.”

The study – “Quantitative Analysis Of Scenarios For Chinese Domestic Unconventional Natural Gas Resources And Their Role In Global LNG Markets” – utilized the Rice World Gas Trade Model to examine the market implications and geopolitical consequences of potentially important supply and demand side developments in China.

The results were based on three scenarios.  The reference case posits a scenario where all known global shale gas resources can be developed given prevailing commercial technologies.  China’s recoverable shale gas resources would equate to 75 trillion cubic feet (Tcf).

In the high-China-shale case, the recoverable shale gas resource in China would be 600 Tcf.

Finally, the low-China-demand case posits a much slower growth rate for the Chinese economy.  The average annual growth rate would be 2.5%, which is half the GDP growth rate of 5.1% in the reference case.

“We find is that you have robust shale gas development that is every bit as game changing regarding the projected future as what we’ve seen in North America.  I think that’s a pretty important point because you’re talking about a very large market,” Medlock stated.

“If you have a lot of domestic resources, that changes the LNG picture dramatically.

“China’s shale gas development could stand if it is very