China Promotes Shale Gas Exploration

OIL FOCUSChina PromotesShale gas Exploration(China University of Geosciences, Beijing)China has awarded two out of four shale gas blocks estimated that China holds 36. 1 trillion cubic meters ofoffered in its first auction of the unconventional gas technically recoverable shale gas reserve -significantlyresource with Sinopec Corp and a provincial coal seam higher than US reserves of 24. 4 trillion cubic metersgas firm each winning one block. "Both blocks are in Industry estimates in China peg shale gas resourcesChongqing area. The contracts will be signed shortly, slightly lower-but still huge-at 26 trillion cubic meters,an official with the Ministry of Land and Resources although they have yet to give their own forecasts of howsaid in early July 2011. China issued its first shale gas much of that is recoverable. The blocks in the tender areexploration tender with an offer of four blocks to a group mostly in the southwestern Chongqing municipality andof Chinese energy companies in late June, as the country Guizhou Province and cover an area of 11, 000 squarekicked off its search for potentially vast reserves of the kilometers, smaller than an earlier announced plan to offerresource. China plans to hold another similar auction in eight blocks with an area of 18,000 square kilometersthe second half of the year, according to the oil and gas Officials have said the shale gas tenders would be openstrategy center of the Ministry of Land and Resources, a only to Chinese companies, but foreign companies werekey government agency behind the shale resource push. welcome to enter into partnerships with the winners. TheThe second public tender may open the sector partially auction also offered a possible chance for CNOOC Ltd toto foreign companies. As an attempt to better manage expand into Chinese onshore gas plays CNOOC Ltd wasthe country's oil and gas resources, the ministry tries to the first Chinese energy company to land shale gas dealspromote the shale gas mining industry and change the overseas, getting stake acquisitions of drilling acreages ofenergy structure through tender sale.the US independent company Chesapeake Energy CorpThe Ministry of Land and Resources issued the tender China is eager to boost the use of cleaner natural gasPetroChina, Sinopec, CNOOC Ltd, Shaanxi Yanchang to tame the growth of coal. For now, China does not havePetroleum Group and two coal seam gas companies any shale gas production. Its total gas output, mostly frome China United Coal Bed Methane Co, and Henan conventional reservoirs and tight gas deposits, was aboutProvincial Coal Seam Gas Development and Utilization 94 billion cubic meters in 2010, a volume set to triple toCo "By reducing the number of blocks on offer, were 300 billion cubic meters in 2030, Chinese oil companieshoping to bring about more intense competition, "said have estimatedan official with the Ministry of Land and Resources. Theauction comes several months later than expected as the More shale blocks expected for auctionministry was trying to bring more companies, such as China may hold a second and possibly a third auctionSinochem Corp and Zhenhua Oil, into the competing of shale-gas blocks by the end of this year, accordingto Pan Jiping, a researcher at the Ministry of Land andThough still in an early stage, Chinas shale gas Resources. There will likely be a"noticeable"increaseindustry has attracted the attention of global energy in the number of blocks up for auction and participatingcompanies such as Royal Dutch Shell PIc, BP Plc and companies in the furv凵中国煤化工 ding thatUS independents such as Hess Corp. and Newfield the success of the firCNMH Gation forExploration Co. The US Energy Information Agency has future saleso.3,2011OIL FOCUSThe ministry is still under preparation. I believe the industry is still at an early stage of development andnext round will proceed more rapidly and efficiently the government should introduce capital from privatecompared with the first auction, which was a revolutionary companies to foster positive competition and stimulatestep forward for the sector, "Pan said, adding that the industry growth. Reportedly, The government is stillgovernment is still very cautious and will not make bold discussing the possibility of allowing foreign companiesmoves. China is estimated to have 31 million square to participate in the auctions, Pan said. He said that thekilometers of recoverable reserves of the fuel. Liu Tienan, bidding procedures and criteria for foreign companieshead of the National Energy Administration, said in mid- not fully developed and have yet to be finalized. "SomeAugust that China's abundant shale gas resources are a foreign companies have expressed their willingness tosignificant contribution to the country's energy needs. The participate. I believe it will not take long and it,'s possible12th Five-Year Plan(2011-2015) includes exploration that several blocks may be opened up for bids from bothand development of shale gas as a key component of the domestic and foreign companies, "Pan saidnations strategic energy plan. The current plan sets the MIIT's data showed that China's natural gas importsframework for further development during the next Five- in the first five months of 2011 surged by 91. 4 percentYear Plan starting in 2016to 7.8 million tons compared with the same period lastSinopec has repeatedly expressed that unconventional year, signaling that the government's efforts to encouragegas will become a major force for the companys natural gas consumption have started to work. Thegrowth and it will cooperate with overseas companies apparent consumption of natural gas rose 18 percent into accelerate shale gas exploration. Chinas shale gas the first five months to 19.8 billion cubic meters. As aresult, the country's accelerated development ofunconventional natural gas, including shale gas,will help ease its heavy reliance on natural gasCoal-bed gas production to be doubledby2015China plans to more than double production ofits coal-bed methane by 2015 to cut reliance on oiland coal. The country aims to increase its annualoutput to 21 billion cubic meters by 2015 from 8.6billion cubic meters in 2010, according to SinopecThe country, which failed to reach a target focoal-bed methane production last year, will see aapid development of the industry in the comingfive to 10 yearsChina is likely to double the subsidy for theexploration of coal-bed methane to 0. 4 yuan(6cents)a cubic meter and increase governmentpayment for power generated by coal-bed methaneto 0.35 yuan a kilowatt-hour from 0.25 yuancurrently, Sinopec said, adding that the nation alsoplans to set up a fund for exthe fuelChina's production last year was below a target of10 billion cubic meters. Low returns and difficultyin delivering the gas to users have dampenedinvestment in the industry in the last few years.Zhaotong Shale Gas Demonstration Area is a key area of Petro chinaThe cadd 1 trillion cubic meters ofZhejiang Oilfield Company in shale gas exploration and development, andit has broad prospect for shale gas exploration and development. The pictureal-be中国煤化工5and2 trillionshows the construction site of the 2D seismic acquisition project to be cubicCNMHGundertaken by CNPC BGP in the Demonstration Area12 CHINA OIL&GAS