Non-energy firms pursue shale gas

Shanghai-listed Ling Yuan Iron and Steel Group Co (Ling Yuan), a State-owned steel maker, plans to raise up to 1.4 billion yuan ($225.26 million) via a private equity placement in order to fund its investment in a shale gas project, the company said Wednesday in a filing to the Shanghai Stock Exchange.

Specifically, Ling Yuan intends to purchase a 75 percent stake in its subsidiary which operates a shale gas field in Liaoning Province, according to the paperwork it offered to exchange officials.

Ling Yuan is not the only non-energy enterprise which has come forward recently with plans to invest in shale gas. Industrial chemical conglomerate Hubei Yihua Group made similar announcements late last year, suggesting that large industrials are taking a favorable view of shale gas as officials roll out supportive policies, Wang Ruiqi, a natural gas industry analyst with C1 Energy, a data provider for China's energy markets, told the Global Times.

In its filing, Ling Yuan predicted that its investment target could add an average of 100 million yuan annually to its profits in the years ahead.

As China's crude reserves shrink and the country becomes more reliant on oil imports, Chinese energy officials have emphasized the development of shale gas as an alternative to petroleum, Liu Enqiao, an energy analyst with Anbound Consulting, told the Global Times.

Although no companies in China have begun commercial shale gas operations, the Ministry of Land and Resources announced in March 2012 that it aims to see the country pump 6.5 billion cubic meters of shale gas by 2015.

To meet this target, subsidies of 0.4 yuan per cubic meter of shale gas will be offered to companies until 2015 as part of broader initiatives to optimize the country's energy structure, the Ministry of Finance said last November.

To ensure efficiency, companies with limited expertise in the energy market should partner with professional gas explorers in order to acquire technology and learn from industry best-practices, both Wang and Liu suggested.