Shale gas auction draws more than 200 bids

More than 200 domestic companies have applied to participate in the second round of shale gas bidding, showing the country's strong enthusiasm in the fledgling sector.

On top of oil and gas companies such as Shaanxi Yanchang Oil Industrial Group and Zhenhua Oil Co, most are from the industries of power, coal or other sectors not pertinent to the oil and gas area, said Li Yuxi, a researcher from the Strategic Research Center for Oil & Gas Resources at the Ministry of Land and Resources, on May 24.

The ministry on May 17 said it would invite bids for for the second round of shale gas blocks. The deadline is May 25.

Domestic companies, including private ones, with registered capital of more than 300 million yuan ($47.3 million) and oil, gas or minerals exploration experience may participate in the auction.

The three biggest oil companies — including China National Petroleum Corp and China Petrochemical Corp, or Sinopec Group — haven't sent applications to the ministry, Li said.

He added that foreign companies or joint ventures are not allowed to bid for domestic shale gas blocks.

China, which is estimated to have 886 trillion cubic feet of natural gas deposits, the world's biggest, held its first shale gas auction in June for six selected State-owned companies.

Sinopec and a local coalbed methane company in Henan won two of the six offered blocks.

Li neither disclosed the number of blocks the ministry will open for bidding in the second round nor revealed when the official bidding will start.

In addition, Jie Mingxun, general manager of PetroChina Coalbed Methane Co, said that China is considering lifting its previous target of having 30 billion cubic meters of production of coalbed methane, of which PetroChina will have 6 billion cubic meters, by the end of 2015 to catch up with the rapid growth of the unconventional gas.

The revised target is expected to come out this year.

Jie said that PetroChina will speed up exploration for coalbed methane, with a plan to drill 2,500 wells this year.

Both shale gas and coalbed methane are classified as “unconventional gas”, which China is keen to explore to support its economic expansion and reduce its reliance on crude oil imports.