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China needs competition in shale gas

By Richard Fu  (Shanghai Daily)

08:41, July 03, 2013

China and other countries need to allow more open access and competition for their shale gas industries if they want to duplicate North America's success in exploiting the resource, a senior official at BP Plc said.

"It did happen in the US and Canada for a reason, and that's competition," said Christof Ruehl, BP's chief economist, at an event for the latest edition of BP's Statistical Review of World Energy, in Beijing yesterday.

Ruehl said a system that allows everybody to participate will help advance technology and cut costs.

China possesses the biggest shale potential outside the US, but it has yet to produce any commercially. The Ministry of Land and Resources has held two auctions for shale blocks since 2011, which marked the start of commercial exploration. Foreign companies have been barred from bidding so far.

Still, some foreign oil firms, such as Shell, have allied with Chinese state oil majors on their existing fields that contain shale in China.

The successful story of shale gas development in the US has been well-documented, with its massive resource base and innovation in horizontal drilling and hydraulic fracturing.

The shale boom in the US has cut the prices of natural gas there and led to slower growth in overall natural gas output in the country. Natural gas output in the US grew 4.7 percent last year, sharply below the 7 percent growth in 2011, according to BP.

"The slowdown was driven by the reorientation of drilling away from gas and toward higher-priced oil," Ruehl explained.

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