China completes shale bidding

BEIJING, Oct. 30 (UPI) -- The latest bidding round for exploration rights on 20 Chinese shale gas blocks attracted a record 83 companies, the Chinese Ministry of Land and Resources said.

The blocks total 7,723 square miles spread over eight Chinese provincial regions, Xinhua news agency reports. The auction is the second since June 2011, when six companies bid on four shale natural gas blocks.


China has 25.08 trillion cubic meters of exploitable onshore shale-gas reserves, the ministry has said. As part of its current 5-year economic plan, China aims to produce 6.5 billion cubic meters of shale gas a year by the end of 2015.

The ministry said the latest bidding was open to only to domestic companies or Chinese-held joint ventures with capital of more than $48 million.

Companies that obtain winning bids -- to be announced after an evaluation process -- will be required to spend a minimum of $4,807 annually on each square kilometer of shale gas blocks over a specified 3-year period and drill two wells on each 500 square kilometers within those blocks.

In a blueprint this year, the Chinese government had promised subsidies and supportive financial policies, including changing the entry criteria to include smaller companies so as to attract interest in its shale blocks from a wider range of companies, the Financial Times reports.


As the world's biggest consumer of energy, China hopes shale gas will provide a plentiful, cheap and clean new energy resource.

However, many of the companies in the latest bidding process -- including power utilities, real estate groups and a coal mining company -- have no experience in oil and gas.

"To put it bluntly, it's like gambling," an executive of a private company involved in the bidding told the news portal NetEase Business.

"Many of these companies have nothing to do with this industry ... Once they win the bid they can transfer (the right) or explore it with other qualified and capable companies. If they don't win they have nothing to lose," he said.

Meanwhile, Chinese energy companies have poured billions of dollars into U.S. shale-drilling projects in an effort to obtain technological knowledge on hydraulic fracturing and other drilling methods to develop China's shale reserves, experts say, Platts news service reports.

But those deals have been structured in such a way that China cannot appropriate those technologies.

"Chinese companies certainly intended to acquire technologies in the U.S. through equity investment, but the problem is that these arrangements have embedded firewalls installed," Bo Kong, an energy expert at Johns Hopkins University's School of Advanced International Studies in Washington, was quoted as saying by Platts.


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