Chesapeake Energy Corporation (CHK), Chevron Corporation (CVX), CNOOC Limited (ADR) (CEO): China Takes No. 1 Spot From U.S. — Good for Us

Turning to the U.S. for help
China hasn’t experienced the same boom in production as the U.S. and is years away from making a significant dent in either oil or gas production by using fracking. Currently, it’s being forced to depend on others to bring needed technology. China’s CNOOC Limited (ADR) (NYSE:CEO) has purchased stakes in Chesapeake Energy Corporation (NYSE:CHK) in the U.S. and built a relationship in China to gain fracking experience. China Petrochemical tapped Exxon Mobil Corporation (NYSE:XOM) to partner on shale projects, providing expertise as the largest natural gas producer in the United States.

Chevron Corporation (NYSE:CVX) and Royal Dutch Shell have already begun drilling in what are expected to be gas-rich regions of China, but the progress is slow. Chevron drilled one well last year and has plans for three more. Shell has drilled nearly 30 wells with partner China National Petroleum and plans to spend $2 billion in China this year, but management doesn’t even expect to know the size of the opportunity until the middle of this decade. Let’s also not forget that most of this development is focusing on China’s abundant natural gas resources. That may expand to oil, as it has in the U.S., but there’s no guarantee China has the same oil reserves as we have found in the past few years.

In tapping multinational companies, China is giving up some of the control it craves in energy and other parts of the economy. China doesn’t normally let outside companies bid on oil projects, so partnerships are a clear sign that China needs help developing its own shale.

To add to the challenge, China has to deal with the environmental impact of fracking. The country has long had water shortages in many energy-rich areas, and fracking is a water intensive endeavor. Then there’s the potential impact of chemicals used in fracking, which has been hotly contested in the United States.

A paradigm shift has begun
For all of the problems the U.S. has faced in the past decade, we’ve done a remarkably good job reducing imports of oil by increasing production and slowing demand growth. An ocean away, the thirst for growth and an expanding middle class have sent China in the opposite direction.

China’s new dependence on foreign oil will have far more impact than just adding to imports. The geopolitical and economic impact could be devastating at a time when China is just becoming established as a major world force.

The article China Takes No. 1 Spot From U.S. — Good for Us originally appeared on Fool.com.

Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Chevron and has options on Chesapeake Energy.

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