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To win hearts and minds, Shell has helped build new roads in the area, funded an addition to the local elementary school, and created an old-age home for widows. Why would an oil major go to such lengths to curry favor in this rural farming community? Simple: If China contains as much shale gas as Shell thinks, the company could be in the early stages of developing one of the biggest energy discoveries in history. Shell says it is investing $1 billion a year to tap into China’s vast basins of shale gas, including here in Sichuan province. And the company doesn’t want that investment endangered by any public-relations blunders.
How much shale gas does China have? The short answer is that no one exactly knows yet. Exploratory drilling is still in the very early stages; Shell first broke ground in Sichuan in 2010. But most in the industry agree that China’s shale potential is vast. The U.S. Energy Information Administration estimates that the country has total reserves of 1,275 trillion cubic feet of shale gas — more than Canada and the U.S. combined. (The U.S. alone is now estimated to have a 100-year supply.)
Shell is not the only Western energy company hoping to capitalize on China’s shale potential. Chevron recently formed a joint venture with the China National Petroleum Corp. and has begun drilling exploratory wells in Sichuan. And Conoco Phillips — in a joint venture with Sinopec — announced in December that it plans to drill wells in Sichuan later this year. The gold rush has begun.