By Richard Fu | 2013-1-21 | ONLINE EDITION
WINNERS of China's second shale gas licensing round plan to invest 12.8 billion yuan (US$2.06 billion) in 19 blocks over the next three years, according to results announced today.
Two privately owned enterprises were among the 16 winning companies, the Ministry of Land and Resources said. The second tender, held in October, was the first time that China allowed private companies and Sino-foreign joint ventures to bid, as the government sought faster access to the resources.
Twenty sites were offered in the auction, covering a total area of 20,002 square kilometers in provinces including Guizhou, Hunan and Jiangxi. One block was removed after it failed to receive enough bids.
Shale gas is trapped in formations previously thought to be unreachable but technologies known as horizontal drilling and hydraulic fracturing have successfully unlocked deposits in the US. The success in the US has also put the resource under the spotlight in China, which is believed to hold the world's largest shale gas deposits.
But unlike US formations, where most shale seams are at depths of less than 3,000 meters, the shale-bearing layers in many Chinese formations are between 3,000 and 5,000 meters deep. Such complex geological conditions could translate to higher drilling costs, said Mirae Asset Securities analyst Gordon Kwan.
International energy majors are also actively partnering with Chinese state companies to monetize the country's vast shale resources.
China aims to produce 6.5 billion cubic meters of shale gas annually by 2015 and 60 to 100 billion cubic meters by 2020, according to official targets. It has yet to produce shale gas commercially.