China To Auction 20 Shale Gas Blocks In October

The second round of auctions will be instrumental in instigating the shale gas development.

Release Date: 28-Sep-2012



China has decided to fast track its shale gas development and start production as soon as practicable. The lessons learnt from the North American shale gas success will be used in developing reserves almost 50% larger than America. The country which holds the world’s largest technically recoverable shale gas reserves at 36 Trillion Cubic Meters will commence the second round of auctions on 25th October for the allocation of 20 shale gas blocks that will cover an area of 20,002 square kilometers. The blocks are being offered in eight provinces viz. 5 blocks in Guizhou and Hunan each, 3 in Chongqing, 2 each in Hubei and Henan and 1 each in Anhui, Jiangxi and Zhejiang. Of these 20 blocks, 11 are bigger than 1,000 square kilometers. The bidders must have a registered capital of more than Yuan 300 Million and can only bid for a maximum of 2 blocks.

The second round of auctions will be instrumental in instigating the shale gas development in the country and with foreign companies allowed to partner with the Chinese firms there will be a larger influx of money and a rapid scale development. Shell has already signed a production sharing contract with CNPC in March for shale gas development and the second round will only result in more international companies entering the Chinese market and more contracts being signed over the next year with hefty sums of money being infused for the development. China plans to produce 6.5 Billion Cubic Meters of shale gas by 2015, an ambitious target considering its current production to be practically zero, for which the second round of auctions is expected to carve the path and initiate the process.

The first auction was held in the middle of 2011, which had not been able to attract any companies other than the national firms. In the first round, China had shortlisted only six companies as eligible for the bidding round. There were 4 blocks to be auctioned which covered an area of 18,000 square kilometers. These six companies were Sinopec, Shaanxi Yanchang Petroleum group, China United Coal Bed Methane Company, Henan Provincial Coal Seam Gas Development and Utilization Company, PetroChina and CNOOC. Only two of the blocks were auctioned and the bids were won by Sinopec and Henan Coal Seam Gas Company. Bidding on two other blocks was cancelled due to inadequate number of bids.

A pivotal change in China’s strategy regarding shale gas auctions was to allow the international companies also to be a part of the development, a tactical point absent in the first round. While the foreign companies will not be able to directly participate they can certainly form joint ventures with the winners and assist the development technologically and financially. This demonstrates China’s dedication towards developing its shale reserves for which it has even opened up its otherwise closed market. The primary reason for including foreign companies was to benefit from the technology that they have developed for the American shale extraction. This will also augment China to develop technology more suitable to its own geology and stratigraphy for the shale reserves.

Although the shale gas development is still in its embryonic stage in the country, the second round of auctions will establish its seriousness in entering the global gas market. The subsequent rounds will depend on the response to the second round but this will kick start shale gas development at a larger scale than ever in the country. China’s dedication towards developing its natural source is bound to change the energy scenario in the Asian region with China, a big importer of gas, turning into an exporter.

The research report “China Shale Gas Market Analysis” by KuicK Research is a detailed study of the factors that will be instrumental in giving China the much required thrust to its economy through shale gas development. The report gives a balanced future scenario of the Chinese shale gas market with the possibilities of high, medium and low production, giving the reader an insight into the market as the future case may be. It also gives the companies involved in shale gas development in China, led by Sinopec that will play the major role in making it a runaway success, much on the lines of the US. The report also takes a look at the political, social and economic factors that might affect shale gas development in the country and also provides a sneak peek into the technological advancements that are required by China. The report is a comprehensive read covering all aspects of Chinese shale gas development and showing the imminent path that the shale gas will take in China.

For more information please visit: “China Shale Gas Market Analysis”

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