China eyes third shale gas auction at end of year

PUBLISHED : Friday, 07 June, 2013, 11:48am
UPDATED : Friday, 07 June, 2013, 3:13pm

China may hold a third round of shale gas auction by as early as the end of the year and plans to encourage more participation from small-and-medium enterprises, the Shanghai Securities News reported on Friday.

China, believed to hold the world’s largest resource of shale gas, hopes to replicate the production boom seen in the United States but faces huge technological and environmental challenges due to more complex geology and scarcity of water.

Beijing is mulling more policies to support shale gas development, such as making initial investments alongside winning companies during the exploration phase, the paper said, citing an official from the Ministry of Land and Resources.

The firms will return the government’s principal investment when they become profitable, said Bao Shuhao, director of the ministry’s geological survey bureau for shale gas, adding that the policy would help alleviate cost burden on private companies and encourage participation from smaller firms.

China, the world’s top energy consumer, wants to open its shale gas sector to a broader base of competitors and has conducted two auctions so far.

The first one, in July 2011, went to state energy giant Sinopec Corp and a regional coal-seam company, but the second one was awarded to 16 local winners, mostly non-oil companies, which would need to buy in the expertise they lack.

Top energy agency, the National Energy Administration, targets to produce 6.5 billion cubic metres (bcm) of shale gas by 2015, or roughly 6 per cent of China’s current total gas production.

It intends to dramatically boost output to 60-100 bcm in 2020, a level some experts say is over-ambitious as it faces technological, environmental and regulatory roadblocks.