Arrivals at the Shanghai Pudong International Airport soon see China’s megacity – 23 million people on streets clogged with automobiles, shiny new apartment buildings and dramatic neon nightscapes.
This haven of the middle class, visitors might assume, is the face of China’s energy problem – a voracious appetite for power use.
In 2011, China alone was responsible for 71% of global energy consumption growth, according to BP. It leads the world in power consumption.
But the middle class isn’t the problem, said Trevor Houser , a partner at Rhodium Group and member of the Council on Foreign Relations and the National Committee on U.S.-China Relations .
China is changing. Its economy will grow more slowly than the breakneck pace of the past. Gradually, energy use is expected to change as China looks toward unconventional fuels, especially shale gas, and other alternatives.
Recently, the Party Congress has modified its policy on shale development to cut its reliance on coal. Analysts say there simply isn’t enough in the world to continue to meet the country’s long-term energy needs.
And Chinese leaders have accepted that they lack the know-how to develop their shale gas.
Cities such as Shanghai and the middle class in general represent “China’s future energy challenge,” Houser said.
Rather, it is Chinese industry, including a mindboggling production of steel and cement in a run up of urbanization that has emptied the pantry. Industry is responsible for 75% of the country’s energy demand, said Houser, who spoke Nov. 9 at a Rice University investment and commodity conference.
“Shale gas has a bright future in China – in the long term,” said Houser, who negotiated several bilateral U.S.-China energy agreements, including the U.S.-China Shale Gas Initiative as an advisor for the State Department.
“Between now and 2020, I don't expect it to add much overall Chinese gas supply,” he added. “The government is interested in developing it, and that has led to new opportunities for US and Canadian firms, but it will take time.”
China has put a spotlight on shale gas development. In 2007, China became a net gas importer, with about 25% of its demand met by pipeline and liquidized natural gas (LNGs) imports, according to Shell.
The government’s five-year plan aims to go from zero commercial shale gas production in 2011 to 230 Bcf/y by 2015, according to the US Energy Information Administration (EIA).
By 2020, China