The Ministry of Land and Resources (MLR) opened the bidding for shale gas prospecting rights Thursday in a move to boost exploration for the abundant resource of energy, and private companies will be allowed to join the sector for the first time.
The tender covers a total area of 20,002 square meters in 20 shale gas blocks in eight provinces including Hunan, Jiangxi and Anhui. Bidders must be China-registered companies with registered capital of no less than 300 million yuan ($48 million), and they must have the necessary oil and gas exploitation qualifications, or cooperate with qualified firms.
The ministry said on its website Thursday that it has received bidding documents from 83 eligible companies.
One-third of the bidders are private firms, according to Zhang Dawei, director of the mineral resources and reserves evaluation center of the MLR.
However, the situation for private bidders is not as optimistic as expected, Li Lingxuan, an industry analyst with commodity information website sci99.com, told the Global Times Thursday.
There will definitely be successful bidders that are private firms, but the number will not be large, Li said.
"Companies with the strongest chance in the bidding are mostly State-owned companies, because private firms are still at a disadvantage in terms of capital, and also exploitation technologies," said Li.
Moreover, even if private companies win the prospecting rights, there are still risks attached to whether they can find shale gas in the blocks within the three-year time limit and whether they can make a profit, given their lack of advanced technology and the unpredictable geographic environment, Li noted.
It costs around 100 million yuan to dig a 3,000-meter-deep well in China, and shale gas development needs many wells, which involves a huge amount of money, according to Zhang from the MLR.
However, some analysts are still optimistic about the future of shale gas. It was stated Wednesday at a State Council meeting chaired by Premier Wen Jiabao that China will encourage private capital to enter the energy industry, and strengthen the exploitation and development of shale gas and coal bed methane.
Shale gas exploitation has good prospects as the unconventional natural gas is abundant and involves lower costs compared with the natural gas more commonly used in China, Sui Ling, an industry analyst at energy information provider JYD Commodities Hub, told the Global Times Thursday.
"Acceleration of shale gas exploitation would relieve China's energy shortage, and its lower costs would also enable huge profits," Sui said.
China's ratio of natural gas imports has risen to 28 percent in the first seven months of 2012 from 5.85 percent in 2007, and the number will reach 30 percent for the whole year, said Liu Tienan, head of the National Energy Administration.
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