What does China want with south Texas? Hint: cleaner energy know-how

Drilling shale to capture oil and gas is a technology that China, which burns a lot of coal, is eager to learn. That's why it's a partner in a south Texas 'fracking' project.

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New York, for one, effectively placed a moratorium on shale-gas drilling after a public outcry over concerns that chemicals used in fracking are contaminating the ground water.

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Meanwhile, the Eagle Ford play has only gained momentum as the industry looks to tap shale formations. Indeed, the advent of fracking has increased US natural-gas reserves nationwide to their highest level since the mid-1970s, according to the US Energy Information Administration.

Currently, natural gas provides about 20 percent of US electricity production; coal accounts for nearly half. But shale gas "is a complete game changer," former BP chief executive Tony Hayward said at the World Economic Forum in January. "It probably transforms the US energy outlook for the next 100 years."

This innovation hasn't spread widely around the globe, though. American efforts still accounted for three-quarters of the world's unconventional drilling in 2009, according to the International Energy Agency.

But international investment in US operations has skyrocketed in the last year, and Eagle Ford has been the focal point.

Private companies from India, Canada, and Norway were the first to put funds in, but the most recent agreement – the $2.2 billion investment by Chinese government-owned CNOOC in Oklahoma-based Chesapeake Energy – has made the biggest splash.

It wasn't CNOOC's first attempt to enter the American energy market. A 2005 bid to take over California oil company Unocal was withdrawn after pressure from Congress against the deal.

"The Chinese had a bruising experience with Unocal because they didn't understand the politics," says Mr. Victor. "I think this is a toe in the water to see what is possible."

In return for capital, these foreign companies will learn how the new fracking technology works and can start to apply that knowledge to their own shale resources back home.

The results could be far-reaching. China could reduce its dependence on coal power and significantly curb emissions, which is what the US sought when the two countries signed a shale-gas initiative in 2009. India may sign a similar deal with the US during President Obama's trip there Nov. 5-8.

"For countries that rely on coal, if they can move to gas, it would have an unbelievable impact on global warming," says Victor.

The potential applications of more-plentiful natural gas are not clear. Some environmentalists worry that it could harm development of renewable energy sources. But expectations are high.

"Shale is the gold rush of the 21st century," Ewa Zalewska, a geology director in Poland's environmental ministry, told The Wall Street Journal in June. "However, it is too early to answer all the questions."