Water Management Biggest Risk to China Shale Gas, Bernstein Says

Water management is the biggest challenge to shale gas development in China amid concern that extraction of the fuel will contaminate drinking supplies, according to Sanford C. Bernstein & Co.

China’s government will need to find ways of getting capital and technology into its shale-gas sector without compromising environmental standards, said Neil Beveridge, a Hong Kong-based analyst at the consultant.

“Despite very little knowledge of fracture stimulation or shale drilling, there is already a perceived concern of potential risks to clean-water contamination,” Beveridge said in an e-mailed report today. “While water is abundant in Sichuan, clean water is less so.”

China is the “biggest shale opportunity” outside of the U.S., according to Bernstein. The country has the world’s largest shale gas resources, estimated at 4,746 trillion cubic feet (134.4 trillion cubic meters), it said, citing data from the Ministry of Land and Resources and the U.S. Energy Information Administration. Within China, Sichuan has the largest potential and the Silurian Longmaxi shale is the most prolific, the consultant said.

In hydraulic fracturing, or fracking, drillers shoot a mixture of water, sand and chemicals underground to free oil and natural gas trapped in shale-rock formations.

To contact the reporter on this story: Chou Hui Hong in Singapore at chong43@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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