China shale gas tantalizing for private firms

BEIJING -- Chinese authorities have been welcoming private and foreign firms to tap the country's vast shale gas deposits, but new entrants have felt impeded by obstacles.

The Ministry of Land and Resources, or MLR, released the results of the second round of shale gas auction last Thursday. Two Chinese private firms, along with 14 State-owned enterprises, won the biddings.

The second round of bidding attracted 83 enterprises to vie for 20 reserve blocks. But the MLR offered minimal geological information for each block auctioned.

"Information sharing is very important for the oil and gas sector. The less data, the more risks, and the more prudent investors will be," an unnamed analyst with an international oil-services firm said in the Dec 3 edition of Caijing magazine.

The MLR said on Nov 22 that it encourages eligible private companies to explore and exploit the country's shale gas reserves, and foreign companies can also join in through Sino-foreign partnerships.

The Ministry of Finance has also promised to offer shale gas subsidies through 2015 to spur development of the resources.

But private and foreign firms have found it hard to reap the economic advantage of this nascent clean energy in China due to the lack of geological information on the reserve blocks and a legal vacuum that fails to address the rights of smaller investors.

Qiao Dewu, deputy chief engineer with the Strategic Research Center of Oil and Gas Resources under the MLR, said the ministry cannot and is "not obliged" to offer further details on the quality of each block.

The aim of the bidding, according to Qiao, is not to sell mining areas with fixed commercial value, but to attract investors to explore these untapped natural reserves.

Another reason that has kept private and foreign bidders hesitant about the auction is that authorities leveled the validity period of the exploration rights for all blocks to three years.

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