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China launches long-awaited second shale gas bid round, offers 20 blocks

China on Monday launched its second upstream shale gas bid round, putting 20 blocks on offer, the Ministry of Land and Resources said on its website.

The tender had been originally scheduled for the end of last year but faced repeated delays.

The ministry said foreign companies will be permitted to submit bids via joint ventures which are majority-controlled by Chinese companies. To be eligible for bidding, all companies must have registered capital of at least Yuan 300 million ($47 million) and must have existing licenses to explore for oil, gas or other mineral resources or partner such businesses. They must also be in good financial standing.

The move to include foreign companies will help address domestic companies' lack of technological drilling and fracturing expertise in shale gas, which is a major stumbling block to current development.

The shale blocks on offer are mostly located in central China, covering a total 20,000 sq km. Five are in Guihzou province, three in Chongqing, five in Hunan, two in Hubei, two in Henan and one each in Jiangxi, Anhui and Zhejiang.

They range in size from more than 300 sq km to 2,300 sq km.

Bidders must also pay Yuan 2 million for each block as part of the bidding terms, the ministry said.

Tender documents and bids must be submitted on October 25 in Beijing, the ministry said.

Beijing has set an official shale gas production target of 6.5 Bcm/year by end 2015, but analysts said this was ambitious given the geological and logistical challenges involved.

The inaugural shale bid round was held in June 2011 with four blocks on offer. The ministry invited just six firms -- PetroChina, China National Offshore Oil Corp., Sinopec, Shaanxi Yanchang Petroleum, China United Coal Bed Methane and Henan Provincial Coal Seam Gas Development & Utilization -- to participate.

Only two blocks were awarded as the other two failed to receive the minimum number of bidders. Sinopec won the Nanchuan block in Guizhou while Henan Provincial was awarded the Xiushan block near Chongqing city.

Meanwhile, state oil and gas companies have said they will submit bids for the latest round, while other state-owned enterprises are expected to form consortiums or tie up with local provincial governments. Other companies expected to be interested include coal miners and power companies such as China Guodian.

A Sinopec official said last week the company would likely bid for four or five blocks.

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