Ministry mulls new shale gas tender

The Ministry of Land and Resources (MLR) is contemplating a third round of public tender for the country's shale gas exploration rights, the Beijing-based Securities Daily reported Tuesday, citing Zhang Dawei, an official from the ministry.

The new round of public tender is expected to take place early next year, the report said, citing an official from China National Petroleum Corp, the country's largest oil producer by output.

The MLR has launched two public tenders to auction off exploration rights to the unconventional natural gas. The previous tender, in December of last year, saw nearly 100 companies participate, with two private companies nudging into the rank of winners for the first time.

However, experts doubt companies will be as enthusiastic when it comes to the third round.

Initial investment in the sector is huge, as shale gas exploration means high input in technology and environmental protection, according to Ma Ji, a shale gas analyst at JYD Commodities Hub Co.

"Some companies found it hard to meet all the requirements after they won the tender, so they have been reluctant to push forward the exploration," Ma said, noting that slow progress for companies who won tenders in the first and second rounds may impact enthusiasm for the third round.

Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, told the Global Times Tuesday that some companies are mainly using the public tender to gain exploration rights, so they are not motivated to make fast progress.

The Securities Daily report also said that some companies which won in the second tender still have not started the exploration process.

"The government should come up with regulations to guarantee progress after the public tender," Lin noted.

In the 12th five-year plan (2011-15) for the shale gas industry, the MLR set a target of producing 6.5 billion cubic meters of shale gas in 2015 for the country's nascent shale gas industry.

Some favorable policies were announced along with the plan, helping the sector to attract many companies in the second round of public tender in 2012.

"I think companies in the third round of public tender will be more rational than before," an official at the MLR, who declined to be named, told the Global Times Tuesday.

The official also said that the shale gas tender will gradually open up to more private companies as well as overseas investors, but did not make clear whether the third round will include any foreign players.

The Chinese government has been boosting the use of natural gas to meet its growing needs as the world's largest energy consumer. Zhang Dawei noted that the country is expected to see a natural gas supply gap of 180 billion cubic meters by 2020.

However, "it is not very likely to see any major progress in the commercialization of shale gas any time soon," said Lin, citing technology and environment concerns.