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Haley Zaremba

Haley Zaremba

Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the…

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China To Ramp Up Shale Gas Production At Home

China shale

Despite the fact that United States President Donald Trump declared a truce between the U.S. and China in their more-than-a-year-long trade war in Switzerland this week, we shouldn’t expect to see a quick economic turnaround. The problem, as explained by The Hill in their article “Trump's 'phase one' deal with China won't undo trade war damage,” is that “the positive results of the deal remain on paper and in the future, while the damage caused by the bruising U.S.-China trade war will continue indefinitely.”

What’s more, “phase one” of ending the trade war is just that--an initial phase, not any lasting or sweeping change. In fact, Trump still stands strong in his position that his tariffs on China are good policy. He told his audience gathered in Switzerland that “these achievements would not have been possible without the implementation of tariffs, which we had to use. And we’re using them on others, too. That is why most of our tariffs on China will remain in place during the ‘phase two’ negotiations.”

It’s not just the U.S. tariffs on China that will remain in place, but Beijing’s tariffs on the U.S. as well. “The phase one agreement also leaves in place U.S. tariffs on $360 billion on imports from China, and Chinese tariffs on more than half of U.S.-exported goods to China,” reports The Hill. “Those tariffs are an open wound on the U.S. economy.”

In the meantime, China has continued its efforts to bolster its domestic energy production in order to ease their reliance on imports to keep the country powered. Beijing is currently preparing for a major energy sector shakeup in the face of mounting pressure to ramp up energy production. “Top executives at China’s leading energy companies are set for a power shake-up as the nation takes steps to reorganize and revamp its leadership and energy infrastructure,” Bloomberg reported earlier this month. As part of the effort to bolster production, last week Beijing “opened its upstream sector to foreign drillers and last month rolled out plans to spin off the nation’s pipelines into a new firm to allow more companies access to energy infrastructure.” Additionally, China’s largest oil firm China National Petroleum Corp. and refining major Sinopec Group (formerly China Petrochemical Corp.) have both announced major lineup changes in their top ranks. Related: The 1.2 Million Bpd Outage That Oil Markets Are Completely Ignoring

Now, just this week, Upstream reports that China is “set to boost shale gas output in Guizhou” at the same time that U.S. shale is set to slow down over the coming year as the country’s “shale revolution” finally begins to wane. The report says that officials from the southwest Guizhou province have announced an “ambitious plan to develop local shale gas resources over the next five years” by drilling over 80 new wells “for annual production capacity of 2 Bcm by 2025.”

As an extra blow to U.S. shale, the recent trade deal struck between Beijing and Washington DC bears no mention of easing Chinese tariffs on U.S. energy imports, which are currently set at 5 percent for crude oil and 25 percent for liquefied natural gas (LNG). China did, however, agree to import more U.S. fuels. As the New York Times reports, “As part of the agreement, China pledged to buy tens of billions of dollars of American fuels of all kinds over this year and next. But the muted reaction was rooted in the perception that both the Trump administration and China are still maneuvering for advantage.” As China and Beijing vie for a competitive edge, however, there is a lot at risk for both nations’ economies and the massive labor forces employed by their dual energy sectors. 

By Haley Zaremba for Oilprice.com

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