Shale gas exploitation likely spurred by incentives

China's natural resource watchdog is considering preferential fiscal and tax policies to spur the country's shale gas exploitation as part of efforts to optimize the country's energy consumption structure.

Authorities are thinking about favorable policies including introducing subsidies and tax breaks for the sector to support its development, said an official with the Ministry of Land and Resources (MLR).

Shale gas exploitation has been gathering steam in China as the nation looks for cleaner energy to cut its carbon emissions and fuel economic growth.

The country's second shale gas licensing round, which will he held in late October, has elicited substantial interest from more than 100 domestic companies, including Sinopec and PetroChina, the country's two largest oil producers.

A MLR statement in early September showed that the nation will offer 20 shale gas blocks with a total acreage of 20,002 square kilometers in the upcoming auction, sharply up from four blocks in its first auction.

However, experts warned that the industry faces a bumpy road ahead, due to the sector's reliance on foreign drilling technologies and a lack of accompanying facilities.

"Large-scale commercial production will rely on construction of nationwide pipeline network and other ground facilities," said Yu Jing, senior engineer with the Planning Institute of Petroleum and Chemical Industry.

The commercialization of shale gas production can be expected in the 13th Five-Year Plan period (2016-2020), Yu said.

At the present stage, China needs to strengthen the geological survey and assessment of its shale gas resources to create more opportunities for exploration, he added.

Shale gas is one of the unconventional sources of natural gases with methane as the main content. It is a clean and high-efficiency energy with wide uses. China aims to pump 6.5 billion cubic meters of shale gas by 2015.