China has set a goal of producing 6.5 billion cubic meters of shale gas a year by the end of 2015 as part of a five-year plan to increase the country's capacity to tap the unconventional resource, China's top energy authority said on Friday.

If the country by 2015 makes the technological innovations needed to better explore for and recover shale gas, its annual output of the resource is expected to increase to as much as 100 billion cu m by 2020, said Zhang Yuqing, head of the National Energy Administration's oil and gas department.

In early March, the Ministry of Land and Resources estimated that China has 25 trillion cu m of recoverable shale gas. The recoverable reserves of the gas are expected to reach 200 billion cu m by the end of 2015.

To achieve its goals, China is looking at providing subsidies to companies, cutting licensing fees, exempting import duties for certain technologies and making it easier for companies to obtain the land approvals for shale gas exploration, among other incentives, said Li Cheng, a deputy director from the Ministry of Finance.

If companies fail to meet the country's minimum work requirements and production targets, the government will revoke their rights to explore gas blocks and sell them to others at auction, the National Energy Administration said.

By the end of 2011, the country's biggest oil companies, including China National Petroleum Corp, China Petrochemical Corp, known as Sinopec, China National Offshore Oil Corp, and Shaanxi Yanchang Petroleum (Group) Co, as well as a coalbed methane company, had begun work on shale gas projects.

Royal Dutch Shell Plc is cooperating with China National Petroleum Corp to explore a gas block in Sichuan province, while Sinopec is working with Chevron Corp to conduct seismic surveys on a block in Guizhou province.

China plans to adopt various advanced technologies from foreign companies, Zhang said.

He said that cooperation will probably resemble similar agreements, such as those used in the past in the exploration for conventional oil and gas.

China's shale gas industry is still in its infancy and lags far behind the United States, which had an annual output of 170 billion cu m in 2011. That was accomplished largely through the use of innovative technologies.

The US ability to recover shale gas is widely expected to reverse the country's heavy reliance on imports of foreign oil and turn it into a net exporter of gas.

In June, the Ministry of Land and Resources held its first auction for the right to explore for shale gas. Six companies were invited to take part in the bidding. Sinopec and a local coalbed methane company won the rights to explore two gas blocks.

China is considering holding a second shale gas auction in April or May, and more companies will be invited to bid for the rights than in the previous one, said Gao Bingqi, a deputy director of the Ministry of Land and Resources' land survey department.

zhouyan@chinadaily.com.cn

(China Daily 03/17/2012 page9)