August 18, 2017 / 8:06 AM / 5 months ago

UPDATE 1-Local firm wins shale gas block auction in China's Guizhou -local media

* State-run firm wins auction for shale gas block

* China wants to unlock potentially massive shale gas resources

* But push has been stymied by cost of drilling (Adds detail)

BEIJING, Aug 18 (Reuters) - A local firm on Friday won the right to explore and develop a shale gas block in the southwestern Chinese province of Guizhou in a government auction for 1.29 billion yuan ($193 million), local media reported.

State-run Guizhou Industry Investment (Group) Co, with business spanning financing, property, power and coal, is expected to start commercial gas production at the Zheng An block within three years, according to a report on Guizhou Radio’s social media account.

The Guizhou firm will become one of the few players not primarily focused on the oil and gas industry to explore and develop the unconventional resource in China.

China’s efforts to unlock its potentially massive shale gas resources have been stymied by the cost of drilling and geological complexity, with only a handful of discoveries now in commercial operations, led by state oil major Sinopec Corp .

The country’s land ministry previously tapped a discovery in exploration well Anye-1 in the 695 square-kilometre (268 square mile) Zheng An block, with a daily gas flow of 100,000 cubic metres, or about 3.5 million cubic feet per day, an amount considered commercially viable.

Four Chinese firms including the Guizhou-based winner attended the auction in Guiyang of the block, with a starting price of 42.36 million yuan.

Landlocked Guizhou province, one of the country’s poorest, has few indigenous oil and gas producing assets, having relied on neighbouring regions for supplies of fuels.

$1 = 6.6762 Chinese yuan renminbi Reporting by Chen Aizhu; Editing by Christian Schmollinger and Joseph Radford

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