China to Hold Second Shale-Gas Auction Next Month, Ministry Says

China will hold its second auction of shale-gas sites next month as it tries to boost exploration and development of the cleaner-burning fuel.

The tender on Oct. 25 will comprise 20 blocks in eight regions, the Ministry of Land and Resources said on its website today. Domestic companies and joint ventures controlled by the Chinese partner, who have registered capital of at least 300 million yuan ($47 million) and hold the relevant licenses, will be allowed to participate in the bidding, the ministry said.

China, holder of the world’s biggest shale reserves, has yet to produce the unconventional fuel commercially, while output in the U.S. surged fourfold from 2007 to 2010. The Chinese government has pledged to prioritize land approvals, allow tax-free imports of equipment and offer subsidies to explorers to spur the industry’s development.

The sites cover a total area of 20,002 square kilometers and are in Chongqing municipality and the provinces of Guizhou, Hubei, Hunan, Jiangxi, Zhejiang, Anhui and Henan, according to today’s statement. Each participant is allowed to bid for a maximum of two blocks.

China aims to produce 6.5 billion cubic meters of shale gas annually by 2015 and between 60 billion and 100 billion by the end of the decade, the National Development and Reform Commission said in March. The country holds 25.08 trillion cubic meters of exploitable reserves of the fuel, according to the land and resources ministry.

The U.S. has an estimated 482 trillion cubic feet (13.6 trillion cubic meters) of technically recoverable shale gas, according to the U.S. Energy Information Administration website.

Technical Challenge

China’s natural-gas consumption will increase fourfold by 2030 to 600 billion cubic meters a year, accounting for 30 percent of the global growth in gas demand, Wood Mackenzie Ltd. said June 6. The nation’s “ambitious” target for 2020 may be delayed by the need for better understanding of its shale formations and insufficient technical know-how, supply-chain services and infrastructure, according to the Edinburgh, Scotland-based consultant.

China Petroleum & Chemical Corp. (386), the nation’s second- largest oil company, and Henan Provincial Coal Seam Gas Development and Utilization Co. won the exploration rights in the nation’s first shale-gas auction in June 2011.

To contact Bloomberg News staff for this story: Jing Yang in Shanghai at jyang251@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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