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China taps shale gas through combined efforts (2)


08:13, October 08, 2012

Inviting more players

The forthcoming auction welcomes both State-owned and private enterprises and is also open to foreign investment, to a certain extent.

According to the MLR statement, any domestic company or Chinese holding Sino-foreign joint venture registered with capital exceeding 300 million yuan ($48 million) and qualified for gaseous mineral exploration may join the bidding.

The participation of private firms at the initial stage of shale gas exploration could provide a substantial boost to the sector, as they bring in capital and possible technical innovations, analysts said.

Many private companies are now actively exploring less costly drilling techniques and making positive progress, they added.

But high risks, huge costs and a long return cycle may still keep out private players without sufficient cash flow.

Shale gas is an expensive business. The exploration and drilling alone may cost hundreds of millions of yuan, not to mention the subsequent construction of pipeline networks and other facilities.

To mitigate the risks shouldered by private companies, some local governments have taken the initiative to facilitate the collaboration between State-run oil giants and their smaller private peers.

Southwest China's Sichuan province, which owns one of China's first shale gas drilling sites, inked an agreement with Sinopec in July. According to the agreement, Sinopec will lead the construction of the province's shale gas pilot project while allowing private capital in with minimized risk.

Experts also expect the MLR to chart smaller blocks to attract more private firms in the auction.

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