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In response to the growing demand for energy and the need to promote the standardized development of shale gas, the Ministry of Land and Resources recently issued a Notice on Strengthening the Exploration, Development, and Supervision of Shale Gas Resources. This move follows the State Council's recognition of shale gas as a new mineral, marking a significant step in China’s energy strategy.
The notice was released at a crucial time when the country is looking to diversify its energy sources and reduce reliance on imported oil and gas. Shale gas, a form of natural gas extracted from shale formations, offers long-term production potential and has become an important supplement to traditional energy resources. With global interest in shale gas increasing, the U.S. remains the leader in this field, having pioneered large-scale extraction and utilization.
In China, shale gas exploration is still in its early stages, but the resource potential is vast. According to the Ministry of Land and Resources, by 2020, natural gas consumption is expected to reach 300 billion cubic meters annually. If shale gas can contribute 100 billion cubic meters, it could significantly reduce China’s energy dependency and reshape its overall energy structure.
To accelerate development, the notice emphasizes market-driven approaches, encouraging various investment entities to participate in shale gas exploration and development. It introduces an open-market principle, allowing independent enterprises with proper qualifications or partnerships to apply for exploration rights. This policy aims to boost competition, innovation, and efficiency in the sector.
Furthermore, the notice strengthens regulatory oversight to prevent issues like land speculation and lack of commitment. A commitment system is introduced, requiring applicants to pledge their responsibilities, including investment, work volume, and compliance with regulations. Provincial and national supervision mechanisms will ensure that these commitments are fulfilled.
According to the Ministry’s assessment, China has an estimated recoverable shale gas reserve of 25 trillion cubic meters, with 180 favorable blocks covering 1.11 million square kilometers. Most of these areas overlap with existing oil and gas blocks, which presents both challenges and opportunities.
To optimize resource use, the notice encourages oil companies to explore and develop shale gas within their existing blocks. If they fail to do so, the rights can be transferred to other investors without affecting conventional oil and gas operations. In cases where oil and gas exploration is unviable, the blocks may be reassigned to focus on shale gas development.
Despite the promising outlook, shale gas development in China faces high costs, technical challenges, and long-term returns. To support the industry, the notice includes several supportive measures, such as conducting detailed resource assessments, enhancing R&D efforts, establishing demonstration projects, reducing mining fees, and ensuring land availability for exploration activities. A provincial coordination mechanism is also proposed to streamline implementation and improve collaboration among stakeholders.
Overall, the notice marks a strategic shift in China’s approach to shale gas, aiming to foster sustainable growth, attract investment, and position the country as a key player in the global energy transition.