Second-round bidders for Chinese shale gas rights pledge $2 bln investment -report

Mon Jan 21, 2013 7:50pm EST

* 16 firms commit to investing $2 bln in exploration

* Part of larger group of companies that won 2nd round auction rights

* China set to become one of world's top producers of shale gas by 2030

SHANGHAI, Jan 22 (Reuters) - Sixteen Chinese companies that won a second round of auctions for exploration rights for shale gas have pledged to invest a total of 12.8 billion yuan ($2.06 billion) over the next three years in the projects, Xinhua reported late on Monday, citing a statement by the Ministry of Land Resources (MLR).

The Chinese companies, including 14 state-owned firms and two private companies, are part of a larger group of 57 companies that were awarded rights to explore 19 shale gas blocks in October.

A total of 26 blocks have been designated for exploration so far by the MLR.

Many of the auction winners on the list were non-oil firms, which could provide lucrative opportunities for service providers such as Schlumberger, Halliburton and China's Anton Oilfield Services Group.

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 them.

China estimates it has 25.08 trillion cubic metres in shale gas reserves, and while the country faces many challenges in exploiting it, analysts still believe the country is set to become one of the largest shale gas producers in the world by 2030.

China's 2011-2015 "five-year plan" for the natural gas sector 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.

The Xinhua report quoted an MLR official saying the ministry will monitor the exploration process and "punish firms that fail to carry out work as promised".

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