Chinese groups flock to shale gas projects

2012-10-26

Small Chinese energy companies are piling into shale gas exploration projects as the country seeks to boost investment in unconventional energy and replicate the experience of the shale gas “revolution” in the US.

The latest bidding round for China’s shale gas blocks drew bids from a record 83 companies, according to a government statement, many of whom are privately owned – highly unusual in the state-dominated energy sector.

Beijing has been trying to promote investment and encourage competition in shale gas by including private companies and smaller companies. The shale bids also represented one of the government’s boldest efforts yet to open new areas of investment to private companies who have long complained of monopolies in some of the economy’s most profitable sectors.

However, analysts say that the latest tender suggests authorities may have gone overboard in their efforts to diversify. Many of the bidders lack experience in oil and gas, and the bidding companies include two real estate groups, several power utilities, an energy trading company and even a coal mining company, according to public statements.

China is the world’s largest energy consumer and policy makers have prioritised shale gas exploration in the hope that it will provide a plentiful, cheap, and clean new energy resource. By some estimates China has the largest potential reserves of shale gas in the world – and if successful the country’s push into shale gas could dramatically reshape global energy markets.

But development of shale gas in China has been slow, with only a handful of shale gas wells drilled to date, and energy executives say it will be difficult for Beijing to meet its target of 60bn cu metres of shale gas production by 2020.

In an effort to boost exploration investment the costly sector, Chinese authorities started putting prospective shale gas blocks up for public auction last year – an unusual move in a country where are usually allocated by the state to either CNPC or Sinopec.

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