China Shortlists Six Firms for First Shale Gas Auction

According to an official with the Ministry of Land and Resources, China has short listed six domestic firms to participate in the nation’s first shale gas auction.

The six firms - PetroChina, China Petroleum & Chemical, Cnooc, Shaanxi Yanchang Petroleum Group, China United Coal Bed Methane and Henan Provincial Coal Seam Gas Development and Utilization - will bid for eight shale gas blocks, the official said.

The ministry will likely hold at least one more auction later this year, which could allow more companies, such as Sinochem Group and China Zhenhua Oil Co., to participate. As these two companies don't yet have domestic mining licenses, they can't bid in the current tender, he said.

A recent report from the U.S. Energy Information Administration showed that China holds 1,275 trillion cubic feet of technically recoverable shale gas reserves, the largest in the world.

The nation has invited U.S. and European companies into its tightly controlled onshore gas acreage in order to gain technical know-how. The firms that win blocks in the upcoming auction will also be allowed to work with foreign companies.

PetroChina completed the drilling of China's first horizontal shale gas well last month in Sichuan province. Horizontal shale gas wells are more productive and have proven to be more commercially viable compared with vertical wells.

Production of unconventional gas, such as coal bed methane and shale gas, is expected to reach 20 billion cubic meters annually by 2020, while output of conventional natural gas will rise to 200 billion cubic meters a year, the Research Institute of Economics and Technology of China National Petroleum Corp. forecast in an annual report earlier this year.