China approves foreign firms in growing sector

China will allow foreign investment in its burgeoning shale gas industry, in the hope that the foreign companies' technical expertise can help extract the resource.

Opening the market to foreign companies will help to achieve a breakthrough in shale gas exploration technology, said Yi Zhongrong, director of the production office of the Jianghan Oilfield of the China Petrochemical Corp, known as Sinopec.

"We are trying to learn quickly about shale gas, and the technologies to tap into the resource, through our own research and development and also from foreign companies," he said.

Foreign firms were excluded in the country's first tender in 2011.

But in the second auction which opened on Thursday, foreign companies were allowed to apply for permits to explore and develop shale gas sites through joint ventures with Chinese companies, according to the Ministry of Land and Resources.

Some global energy companies have shown great interest in the country's shale gas exploration sector, including France's Total SA, which has been in talks with Sinopec for a possible drilling project in East China's Anhui province.

Industry insiders said more overseas firms will be encouraged to invest in the country's shale gas industry.

"The trend is to introduce foreign investment into the shale gas industry. But as this is a completely new sector, authorities need time to figure out how," said Lin Zong, a researcher at the Development and Research Center of the China Geological Survey.

Che Changbo, deputy director of the ministry's oil and gas strategic resources research center, is one of the policymakers charged with attracting foreign investment.

"We are still exploring our options," he said.

As authorities mull further partnership options, Shell signed the first shale gas production-sharing agreement with China National Petroleum Corp in March. ExxonMobil, BP, Chevron and Total have also embarked on shale gas partnerships in China. In all of the joint efforts, the Chinese side controls the joint venture.

Ambitious targets

Shale gas has revolutionized the energy industry over the past decade with significant deposits discovered throughout the world.

The United States has emerged as a leading producer of shale gas, and its boom has led to a big drop in US carbon emissions because the gas is cheap and clean.

China is trying to duplicate the US success with its own shale gas development program and to accelerate its pace in tapping the country's vast reserves.

By 2015, China plans to pump 6.5 billion cu m of shale gas, and between 60 to 100 billion cu m before 2020 from its current commercial production of zero, according to the country's 12th Five-Year Plan (2011-15) on shale gas exploration.

The enthusiasm in the sector is supported by the hope that the central government will give "proper" subsidies and release adequate policies for shale gas exploration, said Zhou Shihong, deputy director of the Chongqing land resources and housing property bureau.

wangqian@chinadaily.com.cn