Stimulating shale gas development in China: A comparison with the US experience

In this paper, we use the US shale gas experience to shed light on how China might overcome the innovation problem inherent in exploring and developing shale gas plays with complex geology. We separate shale gas development into two stages, an innovation stage and a scaling-up stage, with the first presenting a much bigger challenge than the latter. Our analysis suggests that China's national oil companies offer the best hope for overcoming the innovation problem. China's policy of opening shale gas development to new entrants is a market-oriented reform that can be justified on various grounds, but the new entrants will not play a major role in overcoming the innovation problem even though they may help scale up production later on. - Highlights: • We separate shale gas development into an innovation stage and a scaling up stage. • We use the US experience to elucidate how China may solve the innovation problem. • China has to rely on its national oil companies to solve the innovation problem. • Opening shale gas development to new entrants can be justified on several grounds. • New entrants will not help overcome the innovation problem