UPDATE 1-Key state firms among winners in China shale gas tenders

Thu Dec 6, 2012 3:14pm IST

(Adds details, background)

BEIJING Dec 6 (Reuters) - Big state Chinese power firms, such as the Huadian Group and top coal producer the Shenhua Group, have been named among the winners of the country's second shale gas auction, the Ministry of Land and Resources announced on Thursday.

China, the world's top energy user, has yet to start large-scale shale production, but is believed to hold the world's largest reserves of the gas, trapped in rocks and requiring a technology called hydraulic fracturing, or fracking, to unleash.

The ministry announced the tender winners for 19 exploration blocks on its website (www.mlr.gov.cn), with three companies assigned to each block.

Also among the 57 names was the coalbed methane subsidiary of the China National Petroleum Corporation, China's biggest oil firm, and the Hunan Valin Group, a state-owned steel producer.

The State Development and Investment Corporation, a resource-oriented investment group, was also granted exploration rights in Chongqing, but few of the other winners could be considered household names, even in the energy sector.

The presence of so many non-oil firms on the list could provide lucrative opportunities for service companies such as Schlumberger, Halliburton and China's Anton Oilfield Services Group.

China's 2011-2015 "five-year plan" for the natural gas sector, published earlier this week, says the country is "laying the foundations" for large-scale development of the shale gas sector over the period from 2016 to 2020.

China would aim to raise shale gas production capacity to 6.5 billion cubic metres by 2015, it said, or roughly 6 percent of its total gas production now.

Beijing estimates the country has 25.08 trillion cubic metres of potentially recoverable shale gas resources.

As many as 83 companies made 152 bids during the second auction for the right to explore shale gas in a tender that closed on Oct. 25.

A total of 20 blocks with a total area of 20,002 square km (7,722 square miles) was originally up for grabs, but one was taken out of the running after failing to attract enough bids.

(Reporting by David Stanway; Editing by Clarence Fernandez)

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