Shell poised to bid for China shale gas exploration rights

25.1 trillion cu m of exploitable shale gas resources could meet country's gas demands for 200 years

Global energy giant Royal Dutch Shell Plc is eager to participate in China's unconventional gas exploitation projects, especially shale gas, Lim Haw-kuang, executive chairman of Shell China Group, said on Tuesday in Shanghai.

"I am anxiously waiting for the second shale gas tender," he said, adding that Shell is willing to cooperate with the Chinese companies that win the tender.

The Ministry of Land and Resources will open a second public tender for the sale of shale gas prospecting rights later this year, in a bid to feed the country's increasing energy appetite. Media and industry insiders expect the bidding process to start as early as late July.

The second public tender may open the sector partially to foreign companies, the Shanghai Securities News earlier quoted an unnamed source as saying.

However, Shell confirmed it is not registered as a bidder.

In March, Shell signed China's first shale gas production sharing contract with China National Petroleum Corp, the nation's biggest oil company. Both sides will cooperate to develop and produce shale gas in the Fushun-Yongchuan block in the Sichuan Basin, an area covering about 3,500 square kilometers.

Lim said that Shell and CNPC are exploring the block. Conditions are "pretty good", and "it won't take too long" to get the drilling plan. "I reckon it will come out within three years," he said.

Compared to the first auction, which offered four blocks, the second tender may offer about 17 blocks, located in areas including the provinces of Hunan and Anhui, said Jiang Xinmin, the deputy director of the Energy Research Institute, a think tank of the National Development and Reform Commission.

Shale gas is a type of unconventional natural gas trapped within shale formations.

China is estimated to have 25.1 trillion cubic meters of exploitable shale gas resources, exceeding the 24.4 trillion cu m reserves in the United States, and making it the country with the world's biggest reserves.

If all the gas could be extracted from shale formations, the reserves would be able to meet natural gas demand in China for 200 years.

According to a report released by the China Energy Research Society in December 2011, China's dependence on energy from outside the country increased from 8.8 percent in 2008 to 15 percent in 2011. Dependence has increased to 60 percent and 30 percent for the country's oil and natural gas supplies, and the figures are expected to increase.

As one of the world's top energy consumers, China plans to unlock the shale gas resources in the next few years, to reduce its dependence on imported energy.

The US produced 4.87 trillion cubic feet of shale gas in 2010, up from virtually nothing in 2000, according to the US Energy Information Administration. The agency estimates shale gas will account for about 46 percent of US natural gas production in 2035, Reuters reported.

China, which still doesn't have any commercial production, has set an ambitious target to produce 6.5 billion cu m of shale gas by the end of 2015.

"Industry insiders believe that the reserves of unconventional gas in China may equal the totality of the reserves in the US and Canada, although more specific prospecting should be done to support the estimate," Shell's Lim said, noting it is also important to decide whether the reserved resources have commercial development values.

Although Shell has gained rich experience in shale gas extraction in North America, Lim said things in China are different.

"About 4,000 companies are actively operating in the US in the shale gas sector, but the Chinese government has adopted a safer strategy, by mainly inviting State-owned enterprises at this stage," he said.

Moreover, geological conditions in China are also different. But Lim is confident that Shell's experience and advanced technology will help.

Shell has decided to set up its second global research and development center for unconventional gas in Beijing, in order to better support the programs in China and other countries, Lim said.

"Shell is gradually shifting its emphasis to natural gas, and its output surpassed oil last year," he said, adding Shell China will announce more unconventional gas projects in China within a month.

Lim said the development of Shell China projects are closely related to China's energy strategy, which has energy security as its priority.

Shell China is also cooperating with China's domestic energy giants in overseas gas and oil projects, including some prospecting projects in the Middle East that are still confidential.

Contact the writer at xieyu@chinadaily.com.cn.