Shale Gas Becomes "Hard Bone" More Than a Dozen Successful Enterprises Cannot Move

Shale Gas Becomes a "Hard Nut" as Dozens of Companies Struggle to Make Progress Earlier this year, 16 companies secured 19 shale gas exploration rights in the second round of tenders by the Ministry of Land and Resources. However, these blocks have since become a major challenge—often referred to as “hard bones” in industry circles. Despite their initial success, many firms are finding it difficult to move forward with meaningful exploration. On July 16, officials from the Oil and Gas Resources Strategic Research Center at the Ministry of Land and Resources shared insights with reporters from the Daily Economic News. They revealed that the ministry had recently held a meeting with all 16 winning companies to review their progress, challenges, and future plans for the 19 blocks. According to public data, as of June this year, only one company—Huadian Coal Group—had started drilling in a block located in Liyang, Guizhou Province. The rest were still in the planning phase. Industry experts note that the first and second rounds of shale gas tenders targeted areas that had not been previously explored under the “three barrels of oil” (oil, natural gas, and coal). These regions suffer from poor geological data, limited infrastructure, and high exploration costs. Many of the winning bidders lacked experience in oil and gas development, making the situation even more challenging. At the start of the year, six central enterprises, eight local companies, and two private firms won the rights to explore 19 blocks. However, after more than half a year, most of them have made little progress. Only a few companies, such as National Development and Investment Corporation and Shenhua Geological Exploration, have entered the substantive stage of field investigations. Some companies have even transferred their rights. For example, Chongqing Mineral Resources Development Co., Ltd. sold its rights to Huaneng Power International and also transferred most of its shares. This trend highlights the difficulties faced by many firms in sustaining long-term projects. According to representatives from China Coal Geological Engineering Corporation, the company won two of the second-round bids but struggled due to limited experience in shale gas exploration. The process requires significant time and resources to determine gas reserves and evaluate business potential, which is a common issue among other bidders as well. Under current regulations, the 16 winning companies have three years to complete their exploration commitments. The Ministry of Land and Resources has begun monitoring their progress and will take action against those who fail to meet their obligations. At a recent meeting in Beijing, several companies reported on their development status, while traditional oil giants like PetroChina shared their own experiences. Experts warn that the risks associated with these blocks are high. Tian Ting, an analyst at the China Energy Network Research Center, pointed out that the lack of reliable geological data makes it hard for companies to assess the true value of the blocks. This uncertainty increases investment risk, especially given the high costs involved. Most of the 16 companies had no prior experience in oil and gas exploration. Two of them were private enterprises, and four were newly established within months of the bidding. Few possessed the necessary technology for shale gas development, leading some to seek partnerships or transfer their rights. A representative from the Ministry of Land and Resources noted that although the companies obtained their certificates in March, progress has been slow. “Geological exploration follows its own timeline, and this is a normal situation,” they said. An Sinopec expert added that the unclear geological data means that exploration could take at least six months, with actual drilling only possible after geophysical surveys. Additional steps, such as road construction and equipment setup, further delay the process. The total investment required for the 19 blocks over three years is estimated at 12.8 billion yuan, with an average of 670 million yuan per block—far exceeding the minimum tender requirement of 0.9 billion yuan. Experts believe that such high investment commitments may strain the financial capacity of companies, especially when relying on government subsidies of 0.4 yuan per cubic meter to offset costs. In addition, the current low production rates of shale gas wells and the difficulty of achieving large-scale industrialization make the sector risky. With limited short-term returns, many companies face significant financial pressure. To break the monopoly of the three major oil companies—PetroChina, Sinopec, and CNOOC—the Ministry of Land and Resources has been actively opening up new blocks. According to a survey, 77% of favorable shale gas areas and 80% of resource potential lie within existing oil and gas blocks, which have been dominated by the big players for decades. However, many of these areas have seen little new exploration or investment. The new shale gas blocks, which are located outside of the traditional oil and gas basins, offer a chance for smaller companies to enter the market. Although these areas may not be ideal for immediate development, they represent a step toward greater competition and diversification in China’s energy sector.

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