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China Auctions $2.06 Billion in Shale Gas Blocks

16 Companies Receive Exploratory Rights

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By Swagato Chakravorty
Wednesday, January 23rd, 2013

In a second round of auctions for exploratory rights to shale gas blocks in China, sixteen companies have stated that they’ll invest a total of $2.06 billion into the projects over the coming three years. Failing that, the government retains the right to take back the blocks.

According to Reuters, the companies include 14 state-owned operations and two private firms. Last October, 57 companies including these 14 were awarded rights to explore 19 shale gas blocks between them.

So far, China’s Ministry of Land Resources has marked out 26 blocks for such exploration. Interestingly, several winners of the auction are not primarily oil firms, which means external service providers like Halliburton (NYSE: HAL), Schlumberger (NYSE: SLB), and even China’s Anton Oilfield Services Group (HKG: 3337) stand to benefit from these opportunities.

China continues to have a target of 6.5 million cubic meters of production capacity by 2015, and it is accordingly ramping up its auctions and development strategies.

Sinopec (NYSE: SNP), for example, expects to increase production to about 1 billion cubic meters of shale gas production capacity before 2016.

China Daily quotes Cao Yaofeng, VP of Sinopec:

“We will establish 300 to 400 million cubic meters of annual shale gas production in 2014.”

It is estimated that China has the world’s largest shale gas reserves, although the country has not begun serious production yet. It may have up to 25.08 trillion cubic meters in reserves, and by 2030 it may well become a shale gas leader.  

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