Shale gas gets lift on govt promise

Shares of companies in the shale gas industry reported strong performance Wednesday after energy authorities said the government would boost the development of shale gas in 2013.

At the 2013 national energy work conference, China's energy authorities said that the use of unconventional gas resources, such as shale gas and coal bed methane, will be encouraged in 2013, according to a statement posted on the central government's website Tuesday.

Boosted by the news, shares of companies in the sector reported strong increases on the capital market. Shares of Shenzhen-listed Lanzhou Haimo Technologies Co, a shale gas explorer, surged to the daily limit of 10 percent in morning trading Wednesday and closed up 3.46 percent.

Meanwhile, experts noted that the shale gas sector is not likely to see massive development in the short term.

"The government has started to attach increasing importance to shale gas, but it is still hard to see any major development in the sector before 2015," Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, told the Global Times Wednesday.

Lin noted that Chinese shale gas firms mainly use technology from US companies; however, given geologic differences between the two countries, the technology is not yet suitable for shale gas exploration in China.

Shale gas resources are mainly found in mountainous southwestern areas in China, but in the US the resources mainly concentrate in the plains.

"Lack of water is another factor that may hold back shale gas development in China, as exploration of the resource demands a high quantity of water," Lin noted.

The Ministry of Land and Resources announced the results of the second round of public tender for shale gas exploration rights on December 6, 2012. Two private companies have nudged into the rank of winners.

Although many companies are now eyeing the shale gas sector, they are all generally very cautious, as the sector demands a high input of capital and technology while investment return is slow, said Pu Deqin, a shale gas industry analyst at JYD Commodities Hub.

"It is not very likely that private companies will take a big share of shale gas development, as most of them do not have enough capital or technology, and gas pipes in China are still controlled by the two State-owned energy companies PetroChina and Sinopec," Pu said.

Experts noted that although exploration of coal bed methane also demands advanced technology, the resource is expected to gain increasing attention in the future, as its exploration is considered more environmentally friendly.

The 2013 national energy work conference was concluded Tuesday. At the meeting, the government also said use of renewable energy, such as solar power and wind power, will be encouraged in 2013.