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Keen: The result of the tender is to be announced in July. Photo: BEAWIHARTA

China kicks off shale tender

China has issued its first shale gas exploration tender with an offer of four blocks to a group of Chinese energy companies, state media reported.

30 June 2011 6:07 GMT UPDATED 30 June 2011 6:07 GMT

By <ecs_selection>News Wires</ecs_selection>

The tender result will be announced in July and China plans to hold another similar auction in the second half of the year, said Zhang Dawei of the oil and gas strategy centre of the
Ministry of Land and Resources (MLR), a key government agency behind the shale resource push.

In March, the US Energy Information Agency estimated China holds 36.1 trillion cubic metres of technically recoverable shale gas reserve – significantly higher than US reserves of
24.4 Tcm, the next largest, Reuters reported.

Industry estimates in China peg shale gas resources slightly lower – but still huge – at 26 Tcm, although they have yet to give their own forecasts of how much of that is recoverable.

The blocks in the tender are mostly in the southwestern Chongqing municipality and Guizhou province and cover an area of 11,000 square kilometres, smaller than an earlier
announced plan to offer eight blocks with an area of 18,000 sq km.

The Ministry of Land and Resources issued the tender on Monday to PetroChina, China Petroleum and Chemical Corporation (Sinopec), CNOOC Ltd, Shaanxi Yanchang Petroleum
Group and two coal seam gas companies, the official Xinhua News Agency said on its website.

"By reducing the number of blocks on offer, we're hoping to bring about more intense competition," said MLR's Zhang, adding that the companies had submitted their bids with
results likely to be due in early July, Reuters reported.

The auction comes several months later than expected as the ministry was trying to bring more companies, such as Sinochem and Zhenhua Oil, into the competing round. Zhang said
these companies were not in the first tender but might emerge as bidders in the future auctions.

Though still in a very early stage, China's shale gas industry has attracted the attention of supermajors such as Shell and BP and US independents such as Hess and Newfield
Exploration.

Officials have said the shale gas tenders would only be open to Chinese companies, but foreign companies were welcome to join hands with the winners.

The auction also offered a possible chance for CNOOC Ltd, an offshore oil specialist, to expand into Chinese onshore gas plays.
CNOOC Ltd was the first Chinese energy company to land shale gas deals overseas, with stake acquisitions of drilling acreages of US independent Chesapeake Energy, Reuters
reported.

Two other bidders in the auction were China United Coal Bed Methane Co. and Henan Provincial Coal Seam Gas Development and Utilisation Co. China United Coal Bed Methane Co
is controlled by CNOOC Ltd's parent, China National Offshore Oil Corporation (CNOOC).

China, soon to overtake the United States as the world's top energy user and already the world's biggest coal burner, is keen to boost the use of cleaner natural gas to tame the growth
of coal.

Industry estimates in China put shale gas resources at 26 Tcm, smaller than the US estimate but still huge, though China has yet to give its own estimate of how much that is
recoverable, Reuters reported.

For now, China does not have any shale gas production. Its total gas output, mostly from conventional reservoirs and tight gas deposits, was about 94 billion cubic metres in 2010, a
volume set to triple to 300 Bcm in 2030, Chinese oil companies have estimated. (Copyright)
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