Chinese to announce third shale licencing round later this year

Oil jacks in China
Source: PetroChina

It seems that low oil and gas prices have done little to dampen Chinese enthusiasm for shale, with The Ministry of Land and Resources expected to announce the first round of shale gas auctions since it awarder 19 blocks to companies in 2012.

Guo Jiaofeng, a researcher at the Development Research Center of the State Council, a government think tank, said in an interview in Chengdu, Sichuan province, that the third round of shale licencing will aim at attracting more private companies as part of broader reforms of an industry dominated by state-run giants.

The oil and gas research centre at the China Geological Survey, an affiliate of the ministry, has selected 40 parcels in northern and southern China and submitted the list to the land regulator for auction, said Guo Tianxu, an engineer at the centre. The Ministry is expected to select more than 20 parcels from the list for the auction.

Chinese officials seem optimistic that the new round will attract sufficient attention from the E&P companies, despite the fact that none of the blocks awarded in 2012 have yielded producing assets. Also, shale gas subsidies will be reduced to 0.3 yuan ($0.05) per cubic meter from 2016 to 2018 and further to 0.2 yuan from 2019 to 2020 from 0.4 yuan currently, China’s finance ministry said in April.

“It may not be the best time for private companies to bid for shale parcels,” He Sha, a professor at Southwest Petroleum University, said.

“Falling oil prices, shrinking government subsidies and a lack of technology, among other things, will hurt private companies’ chances to succeed in shale gas exploration.”

Meanwhile, state-owned giant Sinopec Corporation is expected to miss its production target set out in 2015, with shale gas production of about 3.5 billion cubic meters – according to Jin Zhijun, president of Sinopec’s Research Institute of Petroleum Exploration and Development. Sinopec’s shale gas output from the company’s 150 shale gas wells in trial operation in Fuling area of southwest China’s Chongqing municipality stood at almost 2 bcm at the end of October.

Source: China Daily, Natural Gas Asia

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