The Chinese government intends to trim the size of shale gas blocks awarded to independent developers during the second shale auction in 2012, after the winners universally failed to meet their investment commitments.
The Ministry of Natural Resources (MNR) awarded 19 exploration blocks in 2012, with the licences requiring 30,000 yuan (US$4,360) per square km of investment during the three-year exploration phase as well as the drilling of two exploration wells for every 500 square km held.
The blocks required a total investment of 12.8 billion yuan (US$1.86 billion) at the end of the exploration period. While the MNR found in a 2016 review that none of the independents had met their investment commitments, it opted to extend the exploration phase by two years until October 2018 rather than take the blocks back.
Industry sources have said the MNR will determine the size of the future blocks based upon existing investment levels, with excess land to be returned to the state.
“Instead of taking the whole block back to the government, the MNR will continue to allow independents to explore areas where investment has been made and initial exploration has been done,” a source familiar with the matter told NewsBase Intelligence (NBI).
The independents have complained about the lack of available block data, giving limited insight into where wells should be drilled. Other industry officials have said the blocks offered to independent developers have limited potential for commercial discoveries because all the prospective shale gas blocks are owned by PetroChina or Sinopec.