Firms see a new gold rush in shale gas

A Sinopec worker holding a rock sample extracted from a shale gas well in Cengong county, in Southwest China's Guizhou province. The well, which is 2,067.85 meters deep, is estimated to have the capacity to produce 100,000 cubic meters of shale gas a day for commercial use. [Photo / China Daily]

Unconventional energy source is proving to be attractive outside the sector as well

With China having put shale gas near the top of the government agenda for energy security concerns, the scramble for this game-changing unconventional gas is gathering momentum.

The Ministry of Land and Resources said that more than 70 companies have shown their interest in participating in the country's much talked about second tender for domestic shale gas blocks, which is estimated to kick off this month or next.

China opened four blocks for the first round bidding to selected State-owned companies last June. China Petroleum & Chemical Corp and a provincial coalbed methane company won the bid for two blocks.

Compared with the first auction to test the water, the second one may offer about 17 blocks, located in areas including the provinces of Hunan and Anhui, for bidding, said Jiang Xinmin, deputy director of the Energy Research Institute, a think tank of the National Development and Reform Commission.

The ever-growing shale gas fever in China, buoyed by the United State's revolutionary breakthroughs in the sector, has turned the new sector that has yet to take off into a new gold rush for companies in the country.

Even domestic property companies, which have generated the biggest number of billionaires in recent years before they started wobbling on the government's tightening policies, are considering seeking a share.

Li Jun, board secretary of Zhongtian Urban Development Group Co, flew almost 2,000 kilometers from the southwestern city of Guiyang to the eastern costal city of Shanghai just to attend a shale gas forum held in the city in July.

"It's not a gamble. We hope to leverage the cash earned from the property market to invest in the energy arena," Li said. Zhongtian is a local real estate developer in Guizhou province with total assets of 15 billion yuan ($2.4 billion), according to its website.

State-owned companies strictly control the energy industry so shale gas may be the last resort for privately held companies to participate in the lucrative sector, Li said.

The Ministry of Land and Resources said in May that Chinese companies with more than 300 million yuan of registered assets and survey licenses for natural resources, among others, are allowed to tender.

Zhang Dawei, head of the oil and gas strategy center of the ministry, reiterated several times in public that private investors are allowed to bid to diversify the investment bodies.

Guanghui Energy Co, a privately held natural gas pipeline operator based in Xinjiang Uygur autonomous region, for instance, has shown its strong interest in shale gas exploration.

"We will definitely apply for the second auction but the government has the final say on whether we can squeeze in," said Wang Yuqin, board secretary of Shanghai-listed Guanghui.