BP aims for involvement in shale gas

China Petrochemical Corp employees at a shale gas production site in Lianyuan, Hunan province. [Photo by Guo Guoquan / China Daily]

BP Plc wants to work with Chinese companies to explore the country's vast reserves of shale gas, in hopes that the government will give direct access to more private enterprises and foreign companies in the sector.

"China is estimated to have the world's largest potential reserves of shale gas... It's an exciting market, but BP's shale gas development has yet to enter the commercialization phase," Chen Liming, president of BP China, said.

"BP has rich exploration experience in unconventional resources in North America, so we hope to use that expertise to join China's development of shale gas."

But he also noted that China's shale gas sector is unlikely to duplicate the success seen in the United States because of different geological conditions and technological challenges.

"The biggest challenge facing China's shale gas development is that most of the mining rights are held by State-owned oil giants," Chen said. "Meanwhile, China also needs more policy support, including a pricing mechanism for shale gas", he added.

In its latest energy outlook, BP said Northern American markets would dominate production of unconventional gas over the next two decades.

China possesses the biggest shale potential outside the US, representing huge opportunities for shale developers.

Chen said BP is also looking to supply liquefied natural gas cargoes to the Chinese market, and the company also wants to explore further cooperation with Chinese oil companies for onshore and offshore exploration.

Since 2010, BP has been working with a subsidiary of China Petrochemical Corp (known as Sinopec) to explore shale gas in the southwest province of Guizhou, the People's Daily has reported.

As part of its drive to reduce reliance on coal and cut air pollution, China is supporting the shale gas industry. Experts believe that shale gas represents a breakthrough in the reform of the nation's energy picture.

A planned third round of shale gas bidding is likely to start soon, a source at the Ministry of Land and Resources said. The source added that a draft of shale gas reserve evaluation standards is nearly completed and will be released within weeks.

So far, the ministry has held two rounds of open tenders for shale gas, marking the start of commercial exploration. But exploration is taking longer than expected.

According to the China Geological Survey, the winning companies' actual exploration work on areas won in the second round of bidding, held in 2012, has been much less than expected. Only 46 percent of the area awarded has been explored so far.

Two Chinese private companies, along with 14 State-owned enterprises, won areas in the second round of bidding for exploration rights.

In first round, held in 2011, only China National Petroleum Corp and Henan Provincial Coal Seam Gas Development and Utilization Co Ltd entered successful bids.