Pipe Dreams: How A Chinese State Company Sought to Ride the US Energy Boom

November 25, 2014

TPCO’s Texas deal constitutes the largest single manufacturing investment in the United States by a Chinese firm and was TPCO’s first such major direct investment in an advanced economy.

The deal was, in essence, a bet on America’s oil and gas boom, particularly the future prospects of its exploding shale gas market. It was, too, a play by an ambitious Chinese local firm to tap and ride that growth while diversifying its markets overseas. Despite low natural gas prices and high production costs, US domestic shale gas production has been moving forward vigorously, driving demand for precisely the type of pipes TPCO produces. But TPCO’s Texas investment is also revealing of market dynamics in China, a country that possesses nearly twice the technically recoverable shale resources of the United States yet lacks the technological capacity and infrastructure to extract these resources in a significant way.

What is more, the story of TPCO’s investment provides insight into the periodically tense bilateral trade relationship between the United States and China. TPCO’s Texas investment was partly catalyzed, albeit unintentionally, by Washington’s levying of tariffs against Chinese steel pipe producers. As this case study goes to press in the fall of 2014, the factory has yet to fully open its doors. Yet even in its current, partially completed form, the investment reveals some unique lessons that can inform and shed light on other Chinese direct investments in the US market.