Will Water Keep China From Tapping Shale Gas?

The Motley Fool's energy bureau chief, Joel South, spoke with Michael Levi about his new book, coauthored with Elizabeth Economy, By All Means Necessary: How China's Resource Quest is Changing the World. As the David M. Rubenstein Senior Fellow for the energy and environment at the Council on Foreign Relations, Levi is no stranger to the impact that countries and their decisions have on the rest of the world. In fact, Levi also writes a blog for the CFR, Energy, Security, and Climate, where he discusses the relationship between energy, the world, and its inhabitants. In By All Means Necessary, Levi analyzes the impacts and effects China's resource hunt has on the world and international affairs, specifically looking at the synthesis of economics, security, and politics.

In this portion of the  interview, Joel South asks Michael Levi how water and China's need for it affects Chinese companies and, in particular, the future of shale gas. Levi explains that the ramifications of water in China are widespread as the need for water affects the bottom line of shale development. Levi also explores how water affects more than China.

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Joel South: I wanted to look at some potential problems back in China, in developing their own assets. Obviously, there's a lot of issues around developing shale assets -- you have to have the infrastructure -- but in your book, you looked a lot into water scarcity and property rights in China.

I was just curious what you think about water scarcity, and that really holding back a widespread use of extracting shale assets.

Michael Levi: I suspect that, for shale gas development to pick up in China, companies will need to find different business models that allow them to drill more successful wells and avoid using a lot of water on unsuccessful ones. By "successful," I don't just mean that it produces gas -- these all produce gas -- but that they actually make a profit.

There's a separate issue, which is China's pursuit of water, whether it's for energy or for agriculture, oil or gas extraction. In China, accesses water upstream of a host of other countries in the region.

We took a deep dive into this when we were researching the book, and you find that the security consequences, the political consequences, and the environmental consequences of trying to use the water that flows across borders can be quite acute because, unlike with all these other resources, the countries that might otherwise depend on the water can't just go to the global market and buy it elsewhere. You're stuck with the water that flows into the rivers and basins you have.

For the entire interview, click here


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