Inadequate Subsidies May Slow Chinese Shale Gas Sector

Inadequate government subsidies and policies may slow down the development of Chinese shale gas industry, Bloomberg reported SPT Energy as saying.

“Depending on the subsidy policy to encourage development won’t be enough,” Wang Guoqiang, chairman of the Beijing-based company, said in an interview to Bloomberg. “More incentives need to be introduced.”

As a result of slower than anticipated drilling SPT Energy, a Chinese oilfield services company, has boosted spending in central Asia.

In November last year, it was reported that the government intends to provide a subsidy of 0.4 yuan (6.3 cents) for every cubic meter of shale gas developed by enterprises during the 2012-2015. Local governments may introduce separate incentives according to regional needs.

China offered 20 shale gas blocks in a second tender, with a total area of 20,002 square kilometres in 8 provinces. Five blocks are in Guizhou and Hunan each, three in Chongqing, two in Hubei and Henan and one each in Jiangxi, Anhui and Zhejiang.

Estimates have said Chinese shale gas reserves surpass even that of North America and will be sufficient for the next 60 years at the current Reserve to Production (R/P) ratio.

The key to meeting the 2020 target is first meeting a goal of producing 6.5 billion cubic meters by 2015, as initial development will be the most difficult phase, Wang told Bloomberg. SPT Energy provided hydraulic fracturing services for two wells in Sichuan last year and plans to work on 14 wells in 2013.