(MENAFN- ProactiveInvestors - Australia) China is set to hold a second round of auctions for shale gas licenses in late October.
It has reportedly received substantial interest from more than 70 domestic companies, including Sinopec and PetroChina, the country's two largest oil producers.
China is also believed to have invited foreign oil companies to participate but in a joint venture capacity.
China is exploring ways to set alight its shale gas resources through the joint efforts of local and international companies.
China will offer 20 shale gas blocks with a total acreage of 20,002 square kilometres in the upcoming auction, according to a statement issued by the Ministry of Land and Resources.
The figures are sharply up from the first auction in 2011, when six companies bid for a total of four blocks.
Analysts said that by 2020, if the nation's shale gas output can reach 60 to 100 billion cubic meters, it would become one of China's primary energy sources.
The forthcoming auction welcomes both State-owned and private enterprises and is also open to foreign investment, to a certain extent.
According to the MLR statement, any domestic company or Chinese holding Sino-foreign joint venture registered with capital exceeding 300 million yuan ($48 million) and qualified for gaseous mineral exploration may join the bidding.
Shale Gas in China - High risk/high return
Shale gas is an expensive business. The exploration and drilling alone may cost hundreds of millions of yuan, not to mention the subsequent construction of pipeline networks and other facilities.
To mitigate the risks shouldered by private companies, some local governments have taken the initiative to facilitate the collaboration between State-run oil giants and their smaller private peers.
Southwest China's Sichuan province, which owns one of China's first shale gas drilling sites, inked an agreement with Sinopec in July. According to the agreement, Sinopec will lead the construction of the province's shale gas pilot project while allowing private capital in with minimized risk.
Experts also expect the MLR to chart smaller blocks to attract more private firms in the auction.
Technical hurdles are another challenge facing the nascent energy sector.
After the United States' successful exploration of unconventional mineral gases, many countries rich in shale gas reserves have turned to the clean, highly efficient energy source, especially amid the recent oil price hikes on the global market.
In the US, the extensive pipeline network for natural gases has greatly reduced the cost of exploiting shale gas, whereas China's current pricing mechanism for natural gases has kept investors away, experts said.
Coal-fired thermal power, which accounts for about 70 percent of China's power capacity, has made power companies very susceptible to coal price fluctuations.
The development of the new, alternative energy source could help taper down the coal price hikes.
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.