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Foreign firms excluded from Chinese shale bids

18th May 2012

Shale gas development is still at the early stage in China, where technically recoverable reserves of the unconventional fuel are estimated to be even higher than in the US.

China launched its shale gas push in late 2009, inspired by a shale boom in the US

China will exclude foreign firms from bidding in its second tender for shale gas blocks, despite a need for overseas technology to help exploit massive reserves of gas trapped within shale rock formations in the world's top energy user.

In its first public disclosure of requirements for bidders, the Ministry of Land and Resources said only domestic firms with registered capital of more than 300 million yuan (USD 47.43 million) could bid, according to reports.

The firms must also have licenses to explore oil and gas or other gaseous mineral resources, or cooperate with businesses holding such licenses.

Bidders must be independent legal entities and joint bidding would not be accepted, the ministry said in a notice dated 17 May on its website, adding that interested parties should submit their interest before 25 May.

China awarded two out of four blocks offered in its first shale gas tender in June last year to China Petroleum & Chemical Corp (Sinopec) and a provincial coal seam gas company.

The government has identified 17 firms to bid for 20 blocks in the second tender, according to Chinese media reports.

China wants to find the right technology to unlock its shale gas resources in the next few years before a leap in production by 2020.

The US Energy Information Agency estimates China holds 36.1 trillion cubic meters (1,275 trillion cubic feet) of technically recoverable shale gas reserves -- significantly higher than the 24.4 tcm (862 trillion cubic feet) in the US, which has the second-most.
Chinese government officials said foreign firms can enter product sharing contracts (PSC) with Chinese firms or provide engineering services, and so far only Royal Dutch Shell has clinched a PSC deal.

State oil firms such as PetroChina and Sinopec have drilled several dozen wells on their conventional oil and gas blocks and brought in firms such as Shell, Chevron Corp and Hess Corp for joint studies.

Chinese state energy firms have also entered into multi-billion-dollar US shale deals with Chesapeake Energy and Devon Energy Corp (USD 1 = 6.3252 Chinese yuan)