Minimums set on China shale gas exploration

Winning bidders at auctions for the second round of shale gas development rights will be asked to surrender their rights if they fail to invest at least 30,000 yuan (HK$37,200) per square kilometre of exploration area annually, according to an official at the Ministry of Land and Resources.

The minimum investment commitment, three times that of conventional natural gas projects, is an effort to ensure companies are serious about investing in the nascent and risky shale gas sector, which has been thrown open to participation by firms other than state-owned oil and gas producers for the first time.

The results of the auction would be known this month, said Zhang Dawei, director of the Ministry of Land and Resources' mineral resources and reserves evaluation centre, on the sidelines of the Global Unconventional Gas conference.

"All the bid evaluation work has been completed, the results announcement may be made before or after the Communist Party congress [due to start on Thursday], but it will definitely be within this month," Zhang said.

Of the 83 firms that submitted bids, less than 20 per cent were pure oil and gas producers, with the rest coming from the coal, power, property and financial investment industries, he said.

In all, 154 bids were received for three-year exploration rights on 20 areas covering 20,002 square kilometres. This would mean the successful bidders must plough a combined total of at least 1.8 million yuan into exploration over three years.

The auction was open to domestic private firms and overseas firms for the first time, as long as they or their partners had the required credentials. Last year, rights to four exploration areas were awarded to two state energy firms.