Non-Oil Companies Dominate China's Shale Gas Auction

China is believed to hold the world’s largest reserves of shale gas and with this in mind, the first round of shale gas auctions attracted many investors who are not a part of the natural gas industry, all hoping to get in on the action.

An official from the Ministry of Land and Resources said that non-oil companies, such as utilities, coal mining companies, real estate firms, and investment firms, have all put in higher bids than the oil companies themselves, meaning that non-oil companies have actually won most of the blocks on offer.

It was the first time that private firms and foreign funded joint ventures had been invited to participate in the auctions, offering great business opportunities to service companies such as Schlumberger, Halliburton, and Anton Oilfield Services Group, who do not normally get the chance to be involved on such a core level.

Zhang Dawei, head of the ministry’s reserve appraisal centre, commented that, “looking from the award results, it's fair to say that non-oil and gas firms will be involved in shale gas business.”

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“It certainly means more opportunities for the service guys like Schlumberger and Weatherford, as these non-oil companies don't have their own expertise," said one official with a U.S. oil and gas company.

Some of the non-oil companies eager to get a share of the predicted shale boom offered more than 10 times the minimum that was being looked for, leading one official from a major oil company to state that “it’s potentially a very risky move. Many of them have underestimated the difficulty of developing shale gas in China.”

83 companies submitted a total of 152 bids in order to win rights to explore for shale gas deposits throughout 20 blocks which cover around 20,000 square kilometres.

By. Charles Kennedy of Oilprice.com