China seeks to develop its massive shale gas resources. After giving two sets of exploration licenses to oil and gas companies, it hopes to keep the momentum going. The Minister of Land and Resources said he intended to shortly allocate new licenses, without giving any timeframe.
This week, 19 exploration areas were distributed to 16 Chinese companies. Foreign companies were allowed to participate in the auction through joint ventures, but none were successful. The winners agreed to invest at least 13 billion yuan (1.56 billion euros) in the next three years.
“Distributed” might be the right word since the license auction was a disappointment. The auction of 20 licenses covering almost five million acres of shale blocks drew 85 competing bids. With 95% of blocks awarded, the auction was an improvement on a previous round of bidding in which half the blocks went unsold. The problem this time, though, is that few winning bids came from companies with specific expertise in shale gas production. More than 80% of the winning bids came from local energy companies, coal companies and power companies, suggesting the process was more of a land grab than anything else.
China has set a target to produce 6.5 million cubic meters of shale gas by year 2015. With 25,100 billion cubic meters, China is supposed to have the largest reserves of unconventional gas in the world.