China Firms to Invest $2bn in Shale Gas Exploration
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Sixteen Chinese firms that won a second round of auction for exploration rights for shale gas have pledged to invest a total of 12.8 billion yuan ($2.06 billion) over the next three years, according to a report by Xinhua.
The 16 Chinese companies, which include 14 state-owned firms, are part of a larger group of 57 companies that were awarded in October rights to explore 19 shale gas blocks, the Ministry of Land and Resources said on Monday.
Sixteen Chinese firms that won a second round of auction for exploration rights for shale gas have pledged to invest a total of 12.8 billion yuan ($2.06 billion) over the next three years, according to a report by Xinhua.
The 16 Chinese companies, which include 14 state-owned firms, are part of a larger group of 57 companies that were awarded in October rights to explore 19 shale gas blocks, the Ministry of Land and Resources said on Monday.
The bid-winners must guarantee a total investment of nearly 13 billion yuan ($2.1 billion) on shale gas exploration of the 19 blocks, or areas, within three years, or the Ministry has the right to take the contracts back.
A total of 26 blocks, have been designated for exploration so far by the Ministry.
As the world’s biggest energy consumer, China is keen to expand its sources of power supply to meet its growing domestic demands. Beijing is traditionally reliant on imported power and energy sources, which makes it vulnerable to market, supply and price shocks.
Shale gas has emerged as a viable and cleaner alternative to coal and oil but China, already the world’s fourth-largest gas consumer, has yet to start large-scale shale production.
For now, China plans to raise shale gas production capacity to 6.5 billion cubic metres by 2015, approximately 6 percent of its total gas production levels now. Beijing has an estimated 25 trillion cubic metres of shale gas reserves, believed to be the world’s largest reserves of the gas, trapped in rocks and requiring a technology called hydraulic fracturing, or fracking, to unleash them.
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Some analysts believe China could be the biggest shale gas producer by 2030 but experts often point out that China’s lack of technical expertise in shale gas extraction poses a challenge to the industry’s domestic development.
Furthermore, a lack of upstream investment and weak market regulation is just one of the many problems facing China’s gas industry. Citing a September International Energy Agency report, Reuters said:
[quote] Responsibility for regulating the sector is split among the National Energy Administration, the National Energy Commission, the National Development and Reform Commission, the Ministry of Land and Resources and a host of other bureaus in Beijing, while provincial governments protect their own enterprises, and the Big Three oil and gas companies have privileged access to the regulatory process. [/quote]
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