Shale gas third round tender start power or decentralized place

The third round of bidding for shale gas, which has not been moving, has finally made progress. "Daily Economic News" reporter learned that some provinces have taken the initiative to report the shale gas tender block, waiting for the approval of the Ministry of Lands.

After the first two rounds of shale gas bidding, the development of the various blocks was not smooth, and the differences of opinions among the various parties in the new tendering block may be the reason why the Ministry of Lands did not conduct the third round of bidding. Under the multi-party game, the third round of bidding for shale gas will no longer be carried out by the Ministry of Land and Resources, but will be decentralized to the localities. An expert close to the bidding review confirmed that although there is no official document yet, the decentralization of the tender is a foregone conclusion.

The above experts believe that no matter whether the tender is decentralized or not, the key is to take out a good shale gas block to attract capital and enterprises. Therefore, for a new round of shale gas tendering, the conditions of the block will determine the "color" of the tender.

The first two rounds of bidding development are not smooth

The second round of shale gas tenders ended as early as the end of 2012, and the third round of shale gas tenders, rumored to be about to begin in the second half of 2013, still has no official claims.

On the 15th of this month, according to media reports, the Hunan Provincial Department of Land and Resources has submitted five shale gas exploration blocks, including Changde, to the Ministry of Land and Resources. It is expected that a new round of block transfer work will be launched during the year. Yesterday (July 21), the staff of the Geological Survey Department of the Hunan Provincial Department of Land and Resources told the reporter of the Daily Economic News that a brief plan has been reported.

In addition, Guo Qiang, chief engineer of the Guizhou Provincial Department of Land and Resources, confirmed that Guizhou Province also reported the relevant shale gas block data. At present, many provinces in the country have reported their respective shale gas blocks, and the Ministry of Land and Resources is also conducting relevant review work to prepare for the third round of bidding.

After the first two rounds of shale gas bidding, the development of the block was not smooth, which is considered to be one of the main reasons for the delay in the third round of bidding. “The technology of shale gas development in China is not mature, and drilling development requires a lot of funds. Except for Sinopec’s breakthrough in Fuling, other winning companies are not progressing smoothly. In addition, some media have exposed some companies before. Therefore, although the Ministry of Land and Resources is preparing for the third round of bidding for shale gas, there are still many concerns.” Wang Xiaokun, an analyst at Zhuo Chuang Information, told the Daily Economic News reporter.

Domestic shale gas mining has already carried out two rounds of bidding, but it has not brought substantial progress to the development of the industry. In June 2013 and January 2014, the Ministry of Land and Resources, the National Development and Reform Commission, the National Energy Administration and other organizations organized several development progress reports. Only one or two companies have made progress in exploration work, and most enterprises have not made substantial progress. .

Huaying Shanxi Energy Investment Co., Ltd., a subsidiary of Yongtai Energy Co., Ltd., is one of the two private enterprises that won the block in the second round of bidding. The staff of Yongtai Energy told the reporter that one and a half years have passed, and the block it has obtained is “still in exploration”.

Tendering work or decentralization

Although the development of most of the blocks is not going well, some provinces have begun to report on the new block. “The current state has increased the support for shale gas and upgraded it to the height of the national strategic emerging industry. The shale gas project will bring greater economic benefits to the local area in the future. Therefore, local governments are very active.” Zhongyu Information analyst Guan Dali told the reporter of "Daily Economic News".

The positive attitude of local governments has led the Ministry of Land and Resources to consider new models. It is understood that the new round of shale gas block transfer may be uniformly filed by the Ministry of Land and Resources, and the bidding will be carried out at the local level. Each province will be flexible in bidding according to its own situation. The time is not necessarily uniform and the operation is more convenient. “There is currently no document in this program, but it is already a high probability event.” An expert close to the shale gas tender review confirmed.

The decentralization of the third round of shale gas tendering rights may be a helpless move by the Ministry of Lands under the multi-party game. “After the resources are taken out, the local government hopes to get the benefits. If the gas is produced, some of the gas will remain in the place, or some of the tax will be left in the place after the profit. If the locality does not get the income, it will not be willing to come up with resources.” The famous experts said, "This is also the reason why the block was criticized in the second round of shale gas tendering."

In preparation for the second round of bidding for shale gas, the Ministry of Land and Resources has delineated the conventional blocks of traditional oil and gas companies and delineated 25 relatively favorable blocks as the initial plan. In the final plan, some of the blocks were removed after consulting the province, and the area of ​​the remaining blocks was mostly modified and reduced in the province. Due to the poor conditions in the second tender, most private enterprises chose to wait and see.

Fan Bi, deputy director of the Comprehensive Department of the State Council Research Office, previously wrote that China's mineral resources are owned by the state, but the tax rate for resource development is relatively low, and the company's profit margin is large. Therefore, for the development of shale gas, most of the income will fall into the hands of development companies and individuals.

Fan Bi believes that if there is no reasonable distribution system, it may be like speculation and mining rights, as other resource industries are released, and a small number of enterprises and individuals will get too much income. Conversely, if a small number of state-owned enterprises are still the mainstay of shale gas development, local governments will only have a small amount of tax revenue, and most will be turned over to the developed regions or central government where the development companies are located, which will affect the local development enthusiasm.

The new round of bidding blocks is the key

“In the third round of shale gas tendering, the state will increase subsidies for shale gas exploration in the early stage.” The experts close to the review said.

Che Changbo, deputy director of the Department of Geological Exploration of the Ministry of Land and Resources, said at the China International Mining Conference held earlier that "the Ministry of Land and Resources is increasing investment in shale gas exploration. We will release the shale gas market as much as possible. Companies with the ability, condition, and interest to enter."

Lin Boqiang, director of the China Energy Economic Research Center of Xiamen University, believes that from the situation of the first two rounds of shale gas tendering, the increase in subsidies for exploration needs to be considered more cautiously because “it may lead to fraudulent behavior of enterprises”.

"Whether the bidding right is decentralized to the locality or the investment is increased in exploration, only the high-quality blocks can be taken out to attract enterprises and funds to enter, thus promoting the development of the industry." Lin Boqiang told the "Daily Economic News" reporter.

Sichuan Honghua Group Co., Ltd. has experience in oil and gas development, but because it believes that the block in the bidding is not good, it did not participate in the second round of bidding for shale gas. “People-owned enterprises need to consider the issue from a commercial perspective. The cost of shale gas development is too high. Unless the block quality is excellent, the company can see the return, otherwise the company will not easily enter the shale gas field for development.” Deng Xuejun, assistant to the president of Honghua Group, said.

Deng Xuejun believes that increasing subsidies in exploration is a good news for companies that want to enter the shale gas field. But even with the increase in subsidies, the company will still consider subsidies and benefits, because the investment in hundreds of millions of shale gas development is too burdensome for private companies.

In fact, many of the companies that have won the bid are mostly faced with problems in geological surveys, technical reserves, funds, and talents. Because investment is not directly proportional to returns, companies are in a dilemma. “Whether the new round of companies will participate, mainly depends on the quality of the block. If the block is good enough, we can have revenue after the investment, and there is the possibility of participation.” Deng Xuejun said.

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