China to Double Blocks Offered in Next Shale Gas Auction

China, estimated to hold more gas trapped in shale than the U.S., plans to double the number of blocks offered in its second shale-gas auction.

The Ministry of Land and Resources will likely offer more than 20 blocks in the next auction, compared with its original plan of more than 10, Zhang Dawei, deputy director of oil and gas research at the ministry, said by phone today. The increase in blocks has delayed bidding in the auction, originally scheduled for last month.

China, the world’s biggest energy consumer, may hold 48 percent more shale-gas reserves than the U.S., according to the Washington, D.C.-based Energy Information Administration. Beijing aims to triple China’s use of gas to about 10 percent of energy consumption by 2020 to cut its reliance on more-polluting coal and oil.

“All domestic companies and foreign joint venture firms are welcome to participate in the bidding,” Zhang said without specifying the date of the next auction. China, yet to produce any commercial shale gas, is targeting annual output of 6.5 billion cubic meters by 2015 and 80 billion cubic meters by 2020.

Cnooc Ltd. has started drilling at its first shale-gas project in the country, joining rivals including China National Petroleum Corp. and China Petroleum & Chemical Corp. The company know as Sinopec and Henan Provincial Coal Seam Gas Development and Utilization Co. won exploration rights in China’s first auction of two shale-gas blocks, the land ministry said in July.

Royal Dutch Shell Plc invested more than $400 million in Chinese shale-gas projects last year together with CNPC. Their venture drilled 15 wells, Chief Financial Officer Simon Henry said yesterday. The partners plan to drill 20 to 25 wells this year. PetroChina Co., CNPC’s listed arm, has agreed to buy a 20 percent stake in Shell’s Groundbirch shale-gas project in Canada to gain drilling expertise and technology.

Source: Bloomberg