China’s Shale Gas Bonanza May ‘Hurt’ Nigeria, Others

A RECENT report released by the Overseas Development Institute (ODI), the UK’s think tank on development issues, has x-rayed the dynamics of China’s oil economy and its impact on African countries, including Nigeria.              

     The document, which ODI was made available to The Guardian, indicate that a massive increase in shale gas production in China is projected to mean the Asian tiger will import 40 percent less gas — with a big impact on some of the world’s poorest countries.

   Angola and the Republic of the Congo are predicted to suffer a 13 percent hit to their national earnings because of increased energy production by China. Equatorial Guinea and Sudan could lose 5 percent, Yemen 4 percent. 

    The report looks at the ripple effect of a Chinese government forecast that they will produce between 60 and 100 billion cubic metres of shale gas in 2020, up from 6.5 billion in 2015.                  

    The huge increase in production will make China more economically independent. But the country’s ability to hit the target is dependent upon harnessing technology, which requires huge amounts of water. 

    The report, estimates that, if successful, China’s imports of gas could be up to 40 percent lower in the future.  But this increase in home production could hit the economies of poorer countries , who currently export gas.                

    Zhenbo Hou, a researcher into the growing BRICS (Brazil, Russia, India, China and South Africa) nations at the ODI, said: “China has run a very successful shale gas pilot scheme. “Starting from a low base, they now seem on course to increase their production ten-fold to between 60 and 100 billion cubic metres by 2020.

     “This will make them less reliant on countries like Russia for energy in the future — so it is a very important geopolitical moment.                   .

   “Combined with the increased shale gas production in the USA, it will hit the economy of small exporters in the developing world.               .

   “This increased production could lead to smaller markets and lower incomes for poorer countries that export gas – like Yemen, Mozambique, Ghana, Republic of the Congo, Mauritania and Nigeria.

   Asked, however, to explain how the expected increase in China’s shale gas production could significantly affect Nigeria — in view of the fact that very little crude oil business currently exists between both countries — the following exchange ensued:

How would you place China’s annual crude (and gas) imports from Nigeria; what percentage of the country’s exports does China take?

  Very small. According to NNPC’s Annual Statistical Bulletin, only about one percent of NNPC’s crude oil is exported to China. 

Since, according to your report, the increased production would hit the poorest African countries, do you really think Nigeria whose economy (thanks to GDP rebasing) recently became the biggest in Africa, falls within this category? 

  No doubt, major energy exporters such as Nigeria will be hit, but the effects would come more from the loss of exports to the US

With specific reference to Nigeria, what advice do you  have for African countries, which, according to you,  will be adversely affected by  this China’s new-found capacity in shale gas production? 

  China’s new found shale-gas capacity would only have limited impact on Nigeria at the moment, as very little of Nigerian oil exports depend on China

It is well known that China’s economic ties with Nigeria, is not so much about oil; Nigeria’s big developing economy provides some critical

(‘virgin’) training ground and job opportunities for China’s technocrats. Don’t you think that China would still need Nigeria a great deal — shale gas or not?

   Nigeria is a very important friend for China in Africa and there are many experienced and well-qualified Chinese companies and engineers working in Nigeria. The Chinese Premier’s visit to Abuja this week (last week) will highlight and showcase this ever-growing relation. 

     The increased shale-gas production is also not without risks within China itself, as it could divert water from agriculture and human consumption. The supply of water is likely to be more constrained in China than in the USA, which is also becoming energy self-sufficient thanks to fracking.                    

   America is set to overtake Saudi Arabia as the world’s biggest oil producer. This increased production by the world’s two economic superpowers – China and US - will lead to smaller markets and lower incomes to poorer countries that export gas, according to ODI.                        

    Currently China produces very little shale gas, but production is expected to reach between 60 and 100 bcm by 2020, compared to an estimated 250 bcm imports of gas predicted in 2020 – from which it may be inferred that Chinese gas imports would by then have been around 30 or 40 percent higher in the absence of domestic production.