July 6, 2011 / 1:54 PM / 8 years ago

Sinopec, Henan CBM win China's first shale gas tender

BEIJING (Reuters) - China has awarded two out of four shale gas blocks offered in its first auction of the unconventional gas resource to China Petroleum & Chemical Corp (Sinopec) and a provincial coal seam gas company, a government official said.

The Sinopec logo is seen at one of its gas stations in Hong Kong April 26, 2010. REUTERS/Bobby Yip/Files

Beijing launched the auction last week, offering four blocks to six Chinese companies, kicking off at a government level a push for potentially huge resources in an attempt to boost use of the cleaner-burning fuel.

The two blocks that have been awarded, near the southwestern city of Chongqing, each cover an area of about 2,000 square km.

“Both blocks are in the Chongqing area. The contracts will be signed shortly,” an official with the Ministry of Land and Resources told Reuters on Wednesday.

Sinopec, the country’s No.2 energy company, won the Nanchuan block and Henan Provincial Coal Gas Development and Utilisation Co was awarded the Xiushan block, said the official.

Bids for the other two blocks, in southern Guizhou province, were annulled as fewer than three companies submitted bids. The official did not say if the two blocks will be re-tendered.

The U.S. Energy Information Agency estimated in March that China has 36.1 trillion cubic metres (1,275 trillion cubic feet) of technically recoverable shale gas reserves, significantly higher than U.S. reserves of 24.4 trillion cubic metres, the next largest.

The ministry has required the winning firms to invest a minimum 20,000 yuan ($3,077) for each square km each year, China Energy News reported on Wednesday.

China does not produce any shale gas yet, but the nascent shale gas industry has attracted the attention of international energy companies such as Royal Dutch Shell Plc, BP Plc and U.S. independents such as Hess Corp and Newfield Exploration Co.

Foreign firms are not allowed to participate in the auction but are welcome to tie up with the winners, the ministry has said.

The ministry was expected to issue another tender in the second half of the year.

Editing by Chris Lewis and Anthony Barker

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