The WND Money article ” Obama lets Chinese own U.S. energy resources” | Beijing acquiring major ownership in oil, natural gas across nation| by Jerome R. Corsi | January 22, 2013 is causing a stir among fracking opponents.
“Allowing China to have equity interests in U.S. energy production is a reversal of the Bush administration’s policy. In 2005, the Bush administration blocked China on grounds of national security from an $18.4 billion deal to purchase California-based Unocal Corp.
As WND reported Monday, Beijing has been developing a proposal in which real estate on American soil owned by China would be set up as “development zones” to establish Chinese-owned businesses and bring in its citizens to the U.S. to work.”
The two big Chinese players are CNOOC, and Sinopec. CNOOC is 100% owned by the Chinese government. Sinopec Group is also owned by the Chinese government. It is an investment company created to acquire and operate oil and natural gas interests worldwide and is the largest shareholder in Sinopec Corporation.
Per WND: The Wall Street Journal recently compiled a state-by-state list of the $17 billion in oil and natural gas equity interests CNOOC and Sinopec have acquired in the U.S. and Canada since 2010.
- Colorado: CNOOC gained a one-third stake in 800,000 acres in northeast Colorado and southwest Wyoming in a $1.27 billion pact with Chesapeake Energy Corporation.
- Louisiana: Sinopec has a one-third interest in 265,000 acres in the Tuscaloosa Marine Shale after a broader $2.5 billion deal with Devon Energy.
- Michigan: Sinopec gained a one-third interest in 350,000 acres in a larger $2.5 billion deal with Devon Energy.
- Ohio: Sinopec acquired a one-third interest in Devon Energy’s 235,000 Utica Shale acres in a larger $2.5 billion deal.
- Oklahoma: Sinopec has a one-third interest in 215,000 acres in a broader $2.5 billion deal with Devon Energy.
- Texas: CNOOC acquired a one-third interest in Chesapeake Energy’s 600,000 acres in the Eagle Ford Shale in a $2.16-billion deal.
- Wyoming: CNOOC has a one-third stake in northeast Colorado and southeast Wyoming after a $1.27 billion pact with Chesapeake Energy. Sinopec gained a one-third interest in Devon Energy’s 320,000 acres as part of a larger $2.5 billion deal.
China’s interest in American Natural Gas is not just to benefit from the natural gas vis-à-vis exporting to China – it’s to learn the technology of fracking. Natural Gas prices are very low; many corps are running at a loss because the process of drilling (especially in the Marcellus) is more than what the gas is being sold for at the market.
The “blame” for low prices has been placed on last year’s warm winter. Although a warm winter is a contributing factor, the greed for gas created a glut which drove prices significantly lower. Supply still outstrips demand, which is why you are seeing a push for natural gas powered vehicles. The more vehicles using natural gas means the demand will rise and with it the prices.
The glut is also the reason behind the push for exports. Not too long ago, the Natural Gas talking point was all about American Natural Gas for America. You’re not hearing about that too much anymore.
Per Marcellus Shale Coalition (emphasis added): What They Are Saying About Safe, Job-Creating American Natural Gas Production | January 4, 2013
Pittsburgh, PA. – More jobs, a stronger competitive edge for America in the global economy, and strengthened national energy security. These are among the many clear and undeniable benefits associated with the responsible development of clean-burning American natural gas, which is Powering an American Renaissance. And here’s what they’re saying:
Natural Gas “a Game-Changer for U.S. Economy”: As much as the discovery of massive stores of natural gas in the Marcellus Shale formation has already started transforming the state’s economy and landscape, it also has the potential to fundamentally change the nation’s role in the energy security conversation. …
Excerpt: “Moving forward with the timely permitting of [natural gas] exports to our nation’s allies and global trading partners will lead to more American job creation, economic growth, a reduction in our trade imbalance, and cleaner air—all of which is in the public interest.”
Six days later on January 10, 2013, after standing on a soap box, singing the National Anthem and waving a flag about “energy security”, the Marcellus Shale Coalition sent a letter to Department of Energy Secretary Chu .
Excerpt (emphasis added): “Building on our meaningful discussions last February in Pittsburgh, I write to you — on behalf of our more than 300 member companies from across the broad natural gas supply chain — in support of your department moving forward with approval of all pending liquefied natural gas (LNG) export applications for non-free trade agreement countries.”
Excerpt (emphasis added): “We do, however, recognize that we live in an interconnected global economy, and that common sense natural gas export policies, as the recent U.S. Department of Energy (DOE) analysis determines, could be a major economic boost for our nation, which is still struggling with millions of Americans out of work.”
The top two natural gas talking points, largely promoted by the Marcellus Shale Coalition (MSC) and echoed by the Independent Petroleum Association of America’s (IPAA) public relations project (Energy-in-Depth EID), are Energy Security (i.e. get off of Middle East oil) and Jobs. The general public assumes from the blather that MSC and IPAA/EID mean American Gas for America and American Jobs for Americans.
In the context of China buying up US Natural Gas assets, let’s take a quick look at the “energy security” and “jobs”.
As previously mentioned the general American public assumes this means American Natural Gas for America and breaking the dependency on foreign oil. Additionally, according to MSC, exporting American Natural Gas is the “silver bullet” for trade deficits too.
MSC’s letter to Secretary Chu also seeks to tie in trade deficits. Deborah Rogers of the Energy Policy Forum addressed this point.
Marcellus Shale Coalition: Allow Unfettered Exports | By Deborah Rogers | January 13, 2013:
The Marcellus Shale Coalition also claimed benefits for the U.S. trade deficit if shale exportation is allowed. Unfortunately, this shows a facile understanding of the balance of trade. Daniel Griswold of the Cato Institute states most eloquently:
“Contrary to popular conception, the trade deficit is not caused by unfair trade practices abroad or declining industrial competitiveness at home. Trade deficits reflect the flow of capital across international borders, flows that are determined by national rates of savings and investment. This renders trade policy an ineffective tool for reducing a nation’s trade deficit.”
So unless the shale industry has a fail safe plan to ensure that Americans begin saving, shale exportation will not make much a dent at all in the deficit in spite of the grandiosity of such narcissistic statements.
Why is China so interested in the American Shale plays when according to World Shale Gas Resources: An Initial Assessment of 14 Regions Outside the United States US Energy Information Administration (EIA) , Analysis and Projections, China is estimated to have the world’s largest shale gas reserves. And why is China hot to invest and buy up American Shale plays when the price of natural gas is near an all-time low?
It may be thought China is taking a long view and betting on prices going up and thus making a profit at sometime in the future. Currently, the cost of drilling and its related infrastructure far outweigh the market price. Many corporations are bleeding red all over their balance sheets, and executives are praying and dancing naked around oak trees for a cold winter. The excuse for the glut has been place on last year’s warm winter. The production of natural gas without a corresponding demand contributed more to the creation of the glut than a warm winter.
So why is China in America? To learn how to frack shale and take the technology back to China. China’s demand for natural gas is expected to increase. From China’s perspective, it makes sense to learn the technology and frack their own shale as opposed to relying on imports, plus due to its geographic location, China is closer to Pacific markets for potentially lucrative exportation of natural gas.
(EnergyAsia, June 25 2012, Monday) — China’s natural gas consumption will rise from 130.7 billion cubic metres last year to 200 bcm by 2020 and 550 bcm by 2030, said the president of China National Petroleum Corp (CNPC).
Since 2000, it has risen by 5.3 times to make China the world’s fourth largest natural gas consumer behind the US, Russia and Iran, said Zhou Jiping at a recent international gas conference in Kuala Lumpur in Malaysia.
CNPC, which accounts for 75% of China’s natural gas production, is projecting domestic consumption to rise by 8% a year between 2011 and 2030.
MSC also emphasized jobs. Seems every other word out of the natural gas industry and Kathryn Klaber’s mouth is Jobs. The JOBS JOBS JOBS rhetoric is also a great distracter. Blowout in Susquehanna County? Hey, don’t look at the muck running down the embankment; look at the JOBS JOBS JOBS! Contaminated water in Butler County? JOBS JOBS JOBS. Bloody noses and headaches from natural gas compressor stations? JOBS JOBS JOBS. (Would somebody give Klaber a thesaurus so she can find another word for jobs?)
Per WND: Beijing has been developing a proposal in which real estate on American soil owned by China would be set up as “development zones” to establish Chinese-owned businesses and bring in its citizens to the U.S. to work.”
To repeat “ …. to establish Chinese-owned businesses and bring in its citizens to the U.S. to work.”
So much for American jobs producing American Natural Gas for America.
Excerpt per Deborah Rogers: (emphasis added) Industry claims massive numbers of jobs created by the “shale revolution”. It is interesting to note that these numbers come from economic models which industry has commissioned and for which they have paid – handsomely. Economic models, however, are only as good as their inputs. It is not unusual for such inputs to be skewed to favor a certain outcome. This is learned by every Economics 101 student. For instance, industry has claimed impressive numbers in some jobs estimates that, on closer inspection, were subsequently found to contain employment for strippers and prostitutes in the mix. Now while providing new employment opportunities for strippers and prostitutes can certainly be argued as job creation, these are not the sorts of jobs the average American thinks of when they hear such glowing numbers.
What is interesting, however, is that if one scrutinizes actual job figures in the core counties of various shale plays in the country, leaving aside spurious economic models, such numbers are not as rosy as industry promises.
The first 3-5 years is undoubtedly the time of most beneficial economic activity for a region from shale production. After that initial rush, economic benefits have plunged in every shale play to date in the U.S. Out of 32 core counties in the Marcellus, Haynesville, Eagle Ford and Fayetteville shales, which are among the current hotspots for drilling activity and therefore should be the largest job creation engines, almost every county in each of these plays is underperforming its state average. Not only are they underperforming but they are significantly underperforming in spite of all those new opportunities for strippers and prostitutes. And in spite of the fact that these plays are still in their relatively early stages. The same holds true for wages and median household income according to figures taken from the Bureau of Labor Statistics. Such figures are what they are. What they are not are rosy projections gleaned from an economic model produced and paid for by an industry that stands to gain significant monetary benefits.
Even John Hanger, former Secretary of Pennsylvania Department of Environmental Protection (DEP) and now a potential candidate for Governor, questions the rosy rhetoric of JOBS JOBS JOBS in his blog.
Excerpts: “Pennsylvania is among the few states to have a higher unemployment rate in December 2012 than in December 2011. The facts are that Pennsylvania’s unemployment rate was 7.9% in December 2012 and is up from 7.7% in December 2011.”
“Counting direct and indirect jobs created by gas drilling, gas drilling provides less than 2% of the jobs needed.”
What is that number going to look like once China establishes “… Chinese-owned businesses and bring in its citizens to the U.S. to work.”?
For more on foreign interests and AMERICAN shale plays see: AMERICA FOR S(h)ALE.
For more on Natural Gas Industry Job creation: Haliburton Sr. VP helps create jobs for online prostitutes | by TXsharon on October 13, 2012
Excerpt: I have to remind you that strippers who move into an area to service the oilfield mafia are included in the jobs numbers. CNN Money: Drilling into big oil’s big job claims.
It includes everyone from the roughneck in North Dakota drilling a new oil well, to a trucker driving equipment to that oil job site, to jobs created by the spending of those oil workers, such as a clerk at a Wal-Mart (WMT, Fortune 500) or a stripper serving the workers drawn to one of those North Dakota oil boomtowns.
For more on “CHINAPEAKE”:
- AMERICA FOR S(h)ALE | by Dory Hippauf | August 14, 2012
- Chinapeake | by Chip Northrup | July 7, 2012
- Chinapeake Scams American Landowners | by Chip Northrup | July 13, 2012
©2013 by Dory Hippauf