China to Allow More Participants in Shale Auction
China plans to allow more domestic companies to participate in the nation's first auction for shale gas blocks, scheduled in the first quarter of this year, an official with the Ministry of Land and Resources said Tuesday.
"Learning from the experience in the U.S., diversification of participants will benefit development of the (shale gas) industry," Zhang Dawei, deputy chief of the ministry's Strategic Planning Center, told Dow Jones Newswires.
Domestic companies with overseas experience in oil and gas exploration, including Sinochem Group and Citic Group, as well as companies with experience in cooperating with foreign counterparts in local coal bed methane projects, including China United Coalbed Methane Co., will likely be allowed to bid for shale gas projects, but the list of companies hasn't been finalized, Zhang said.
The government previously planned to open the auction to four state-owned oil companies--PetroChina Co. (PTR), China Petroleum & Chemical Corp. (SNP), Cnooc Ltd. (CEO), and Shaanxi Yanchang Petroleum Group.
Meanwhile, the number of shale projects to be put up for auction has been increased from six to eight blocks, and companies will be allowed to work with foreign partners if they win blocks in the auction, Zhang said.
The International Energy Agency estimates that China has reserves of 26 trillion cubic meters of shale gas, which it hasn't been able to access due to a lack of technical expertise.
Shale gas is trapped in relatively impermeable rock, which producers crack into using streams of water and chemicals.
Technical advances allowing the development of shale gas have transformed the U.S. energy sector in recent years, provoking a wave of merger-and-acquisition activity and sharply reducing reliance on gas imports.
Both China and India, which are heavily dependent on imported oil and gas, are hoping to replicate the success seen in the U.S. with their own shale gas reserves. Up to now, China has focused on inviting U.S. and European companies into its tightly controlled onshore gas acreage in order to gain technical know-how.
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 by then, the Research Institute of Economics and Technology of China National Petroleum Corp. forecast in an annual report last week.
Source: Morningstar