Bloomberg News

China Auctions First Four Shale-Gas Blocks, Xinhua Reports

June 28, 2011

(Updates with names of bidders in second paragraph.)

June 28 (Bloomberg) -- China offered its first four shale- gas blocks to domestic developers in an auction yesterday, the official Xinhua News Agency reported, without citing anyone.

Companies including PetroChina Co., China Petroleum & Chemical Corp., Cnooc Ltd., Shaanxi Yanchang Petroleum Group Co., China United Coalbed Methane Co. and Henan Provincial Coal Seam Gas Development and Utilization Co. placed bids for the blocks in Guizhou and Chongqing, in the southwest of the country, Xinhua reported.

The government originally planned to hold the auction in November 2010, Zhang Dawei, deputy director of oil and gas strategy research at the Ministry of Land and Resources, said at a conference last year. Zhang didn’t respond to calls to his office and mobile phone today.

China has as much as 1,275 trillion cubic feet of “technically recoverable” shale gas reserves, or 48 percent more than the U.S., according to an estimate by the U.S. Energy Information Administration on April 5. China’s deposits of the fuel may be 12 times higher than conventional natural gas, the EIA said.

The government aims to triple the use of gas to about 10 percent of energy consumption by 2020, reducing reliance on more polluting coal. It’s drafting a plan to develop domestic shale reserves in the five-year period ending 2015, Yang Lei, director of oil and natural gas at the National Energy Administration, said in Beijing on June 21.

China completed its first horizontal shale gas well in March after 11 months of drilling, according to PetroChina’s parent, China National Petroleum Corp.

CNPC and Royal Dutch Shell Plc are currently exploring the Jinqiu shale-gas block in southwestern Sichuan province. Shell and PetroChina are operating the Changbei tight-gas field in the Ordos Basin in northern Shaanxi province and exploring the Fushun-Yongchuan block in Sichuan.

--Winnie Zhu. Editors: Paul Gordon, Ryan Woo

To contact the reporter on this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net.


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