Auction to boost shale gas exploration

China plans to hold its second auction of exploration rights for shale gas this month to accelerate its search for the unconventional energy source, an official from the Ministry of Land and Resources told China Daily on Thursday.

He also said the country may even hold another auction of those rights this year, noting that the country is expected to extract 100 billion cubic meters of the gas annually by 2020.

The ministry plans to open 25 blocks for exploration in 10 provinces and regions, said Yu Haifeng, deputy director of the ministry's land-survey department. Some of the areas with the best conditions for extracting shale gas will be auctioned in March, he said.

Yu said the preparations for the March bidding are almost complete. He declined to disclose which companies will take part in the auction, saying the ministry's goal is to bring more players into the search for shale gas.

He said a date for a proposed second auction this year has yet to be scheduled.

A source from the ministry, who declined to give his name, said the government may allow private companies to bid on their own, but foreign investors will not be able to take part in shale-gas exploration unless they cooperate with a Chinese company.

In June, China held its first auction of exploration rights in areas rich in shale gas. The exploration rights to two blocks were then awarded to China Petrochemical Corp, also known as Sinopec, and a local coal-bed methane company.

Sinopec said it began working with Chevron Corp in December to conduct seismic surveys on a block in Guizhou province.

The ministry said China has 134 trillion cu m of shale gas resources, of which 25 trillion cu m are recoverable.

That surpasses the 24.4 trillion cu m of shale gas that is technically recoverable in the United States.

The Ministry of Land and Resources said the figures that have been disclosed are rough estimates and that it will continue its survey work to gain a more accurate notion of how much of the country's reserves are recoverable.

China's search for shale gas has led to more than 60 wells being drilled, of which eight were drilled by the ministry for testing purposes.

Zhang Dawei, deputy director of oil and gas research at the ministry, said he is optimistic about the prospects for recovering the gas.

He said shale gas is predicted to make up a third of the 300 billion cu m of natural gas the country is expected to retrieve in 2020. One of the main goals in retrieving such gas is to find more sources of clean power for China, which gets more than 70 percent of its energy from coal.

Sichuan, Hubei, Hunan, Guizhou and Shaanxi provinces, as well as the Xinjiang Uygur autonomous region and Chongqing, will be the main contributors to the increase in shale gas output, Zhang said.

China lags behind the US in its use of horizontal drilling and fracturing technologies, Yu said.

He said the ministry is working with the Ministry of Finance and the National Energy Administration to adopt policies to support the industry.

The ministry said 180 areas stretching 1.1 million square kilometers have been selected as the main places where exploration for shale gas will take place. For many of those places, licenses have already been granted for the exploration for coal and various metals.

The ministry said one of its priorities will be to work with the local government and non-oil companies to find a way to deal with the overlapping licenses.