China to Follow US Model on Shale
China has been mulling on implementing a US model by treating shale gas as separate from conventional hydrocarbons to encourage firms other than state-owned entities to invest.
It may also consider pricing and other incentives across the industry to further tap this potentially huge resource.
With its offer of shale as a separate resource, the government hopes to bring in smaller companies, a model that yielded huge success in the shale gas development in the United States, with a number of independent explorers grabbing the opportunity.
A handful of state-run energy majors now dominate the sector in China as private and foreign firms face such hurdles as securing mining rights for onshore drilling activities or the ability to bid in tenders.
"We're working to establish shale gas as an independent resource. Companies with strong financial standing and technology may participate in the bidding, " deputy director of Oil, Gas at the strategic center of the Ministry of Land and Mineral Resources, Che Changbo said.
The Asian nation may hold the world's largest shale gas supplies at 26 trillion cubic meters, according to Chinese industry estimates, larger than the 24.4 trillion cubic meters in the United States.
The country, which issued its first-ever shale gas tender in July, could float another in the second half of the year. But the first tender was only open to six domestic firms with companies like Sinochem, CITIC Resource, Xinjiang Guanghui and Zhenhua Oil not allowed to participate. However foreign firms are welcome to collaborate with the winners.
But while trying to implement the new model, the government is keen to avoid a repeat of its experience in the coal sector, which was earlier opened to many local miners, resulting in safety and environmental problems thereafter.
"We want to see shale gas being developed in an orderly manner," said Zhang Yuqing, director of Oil & Gas, Department of the National Energy Administration, the country's top energy agency.
"What we've learned from the American experience is that the U.S. government gave a lot of policy incentives. China is also studying pricing policies as well as subsidies - issues that have drawn a lot of attention of the top government officials," Zhang told Reuters.
Source: Reuters