January 11, 2013 / 11:00 AM / 5 years ago

Shenhua Energy wins shale gas block in southern China

HONG KONG, Jan 11 (Reuters) - China Shenhua Energy Co Ltd , the country’s largest coal producer, said on Friday that it has won the auction of a shale gas block in southern China as part of its efforts to further integrate its energy business.

Shenhua Geological Exploration Company, a wholly owned unit of Shenhua Energy, has won the tender for the 1,189-square-kilometre Baojing Shale Gas Block in Hunan province via an auction held by the Chinese government last year, it said in a filing with the Hong Kong bourse.

The move was part of the state-owned giant’s strategy to “broaden its presence in the energy market and optimise its business model as an integrated energy company,” said Shenhua Energy, which also owns power plants and railways and ports.

Shenhua also announced on Friday that it had won official approval to build a 3.28 billion yuan ($527 million) thermal power plant in the northwestern region of Xinjiang.

Big state Chinese power firms have been named among the winners of the country’s second shale gas auction, the Ministry of Land and Resources said announced in December.

Non-oil companies may have won most of the blocks offered in China’s second shale gas auction, media and industry officials have said, which may mean lucrative opportunities for service companies 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.

Shenhua said it will invest 874 million yuan ($140.42 million) in the exploration of the shale gas block over three years, but it also cautioned against investment risks.

“The shale gas exploration and development is in the preliminary stage in China. There are uncertainties in the exploration achievements of and the development prospects for shale gas resources in the Baojing Block,” it said.

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