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China gears up for second shale-gas round

Country hopes to speed up exploration and development

China is gearing up for a second and possibly third auction of shale-gas blocks by the end of this year in an effort to speed up the exploration and development of the unconventional resource to help quench the nation’s thirst for fuel.

There will be a noticeable increase in the number of blocks up for grabs, as well as participating companies, said Pan Jiping, a researcher at the Ministry of Land and Resources (MLR). Pan said the government is still exploring the possibility of allowing foreign players to take part in the auctions. But, he said that the bidding procedures and criteria for foreign companies are yet to be fully developed and finalised.

"Some foreign companies have expressed their willingness to participate. I believe it will not take long and it's possible that several blocks may be opened up for bids from both domestic and foreign companies," Pan told the China Daily.

He added, that the success of the first auction, which included blocks in Chongqing municipality, as well as Guizhou and Hunan provinces, laid a solid foundation for future rounds. In late June, China held its first shale-gas auction, which received bids from six state-owned companies for four blocks.

Sinopec won the rights to explore the Nanchuan block, which covers parts of Chongqing and Guizhou. Henan Provincial Coal Seam Gas Development and Utilisation Company will explore the Xiushan block, which stretches across portions of Chongqing, Guizhou, and Hunan province.

Although the ministry is still preparing for the next round, Pan believes it will proceed more quickly and efficiently than the first auction. The first auction was originally scheduled for November last year, but was postponed to enable the process to be opened to more operators – the MLR tried to attract companies such as Sinochem and Zhenhua Oil to the bidding round. The number of blocks on offer was also reduced – the original round was to be for eight shale-gas blocks covering 18,000 square kilometres.

China's shale-gas industry is still in its infancy and the government should introduce capital from private companies to foster positive competition and stimulate industry growth, according to Wan Xuezhi, an energy analyst at CIC Industry Research Centre.

Only last month, Shell sealed a deal with Henan to start exploring and developing unconventional gas assets in China. As a result, the Anglo-Dutch supermajor will be one of the first foreign firms to explore China’s shale gas potential.

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