Shale gas in China: tantalizing banquet for private, foreign firms (4)

The divorce of "obligatory" exploration rights from "profitable" mining rights has to be addressed via lawmaking before the sector becomes truly marketized, Zhang said.

China sets itself a goal of pumping 6.5 billion cubic meters of shale gas annually by 2015 and commercializing the production by the end of the decade. Authorities are working to fill the regulatory blanks as they fuel the development of the sector.

In November, the MLR also vowed to establish an exit mechanism to make sure that oil firms, who have shale gas reserves in their mining areas but fail to explore fully or at all, give away their exploration rights to other competitors.

This is good news for small and medium-sized companies who wish for a slice of the emerging business but are overshadowed by state-owned oil giants, although with limited resources and uneven playing field, they might find it harder to duplicate the success of their U.S. counterparts.

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