Public tender was applied to shale gas blocks.
Following the first round of public tenders to
attract private investment to shale gas in 2011,
the Ministry of Land and Resources initiated the
second round in September 2012. The two
rounds of public tendering involved 24 shale gas
blocks, covering a total area of 20,002 square
kilometres in Chongqing, Guizhou, Hubei,
Hunan, Jiangxi, Zhejiang, Anhui and Henan.
There were successful bids for 21 blocks. The
bid winners include: large state-owned enterprises like China Huadian Corporation and China
Shenhua Energy Company; energy groups
invested in by local government, such as
Chongqing Energy Investment Group and Tongren Energy Investment Group; and two private
enterprises (Huaying Shanxi Energy Investment
Company and Beijing Titan Source Natural Gas
Resources Technology).
There were breakthroughs in mining rights
reform in conventional oil and gas blocks. The
Ministry of Land and Resources initiated public
tenders for six conventional oil and gas blocks in
Xinjiang in 2015. Thirteen enterprises submitted
bids, including state-owned oil companies, local
energy corporations and publicly traded petrochemical companies. At the end of 2017, the
Ministry of Land and Resources commissioned
the Xinjiang Land and Resources Trading Centre
to list the mining rights for five oil and gas
blocks in Xinjiang for public transfer. The
transfer term was set at five years, two years
longer than that specified in the 2015 tender.
Private companies were also allowed to take part
in this pilot reform of upstream oil and gas. The
objective was to expand investment in oil and gas
exploration and exploitation and diversify
upstream investors. Awarding the blocks by
public tender broke the state-owned oil companies’ monopoly over upstream exploration and
exploitation, helping the reform process to make
substantial progress.
Competitive bidding was also used to transfer
shale gas and coalbed methane exploration
blocks. Guizhou and Shanxi provinces signed
agreements with the Ministry of Land and
Resources to develop shale gas and coalbed
methane resources. On the instructions of the
Ministry of Land and Resources, the Guizhou
Provincial Government auctioned the Zheng’an
block, where Anye Well 1 is located, in August
2017 to accelerate the exploration and production
of shale gas. Besides Guizhou, other provinces
and regions also selected shale gas exploration
blocks for transfer through competitive bidding.
The Department of Land and Resources of
Shanxi Province transferred the mining rights for
10 coalbed methane blocks (covering a total area
of 2,043 square kilometres) through public bidding in November 2017 to seven local enterprises, including Shanxi Blue Flame Coalbed
Methane Group. This was the first batch of
coalbed methane transferred in China after the
reform of the mining rights system. It motivated
local governments and energised the market.
Many support policies have been introduced
to deepen mining rights reform. The Reform
Scheme of the Transfer System of Mining Rights
and Plan for the Reform of the Mineral Resource
Royalty System was adopted in December 2016.
Its purpose was to promote the transfer of mining
rights through competitive bidding, restrict the
transfer of mining rights through private agreement and build a new mineral resources royalty
system with Chinese characteristics. As stated in
the 13th Five-Year Plan (2016–20) for Natural
Gas, the transfer of exploration blocks through
competitive bidding to eligible market participants in a fair and open manner would help
create an exploration and production system
dominated by large state-owned oil and gas
enterprises, but which would also include private
companies.
5.1.2 Market-Oriented Pricing Reform
is Progressing Rapidly
In China, the natural gas price is administered at
different levels. The city-gate price is administered by the price authorities under the National
Development and Reform Commission (NDRC),
and the sales price after the city-gate station is
administered by local government pricing
Special Report 4: China’s Energy System Revolution
455
Following the first round of public tenders to
attract private investment to shale gas in 2011,
the Ministry of Land and Resources initiated the
second round in September 2012. The two
rounds of public tendering involved 24 shale gas
blocks, covering a total area of 20,002 square
kilometres in Chongqing, Guizhou, Hubei,
Hunan, Jiangxi, Zhejiang, Anhui and Henan.
There were successful bids for 21 blocks. The
bid winners include: large state-owned enterprises like China Huadian Corporation and China
Shenhua Energy Company; energy groups
invested in by local government, such as
Chongqing Energy Investment Group and Tongren Energy Investment Group; and two private
enterprises (Huaying Shanxi Energy Investment
Company and Beijing Titan Source Natural Gas
Resources Technology).
There were breakthroughs in mining rights
reform in conventional oil and gas blocks. The
Ministry of Land and Resources initiated public
tenders for six conventional oil and gas blocks in
Xinjiang in 2015. Thirteen enterprises submitted
bids, including state-owned oil companies, local
energy corporations and publicly traded petrochemical companies. At the end of 2017, the
Ministry of Land and Resources commissioned
the Xinjiang Land and Resources Trading Centre
to list the mining rights for five oil and gas
blocks in Xinjiang for public transfer. The
transfer term was set at five years, two years
longer than that specified in the 2015 tender.
Private companies were also allowed to take part
in this pilot reform of upstream oil and gas. The
objective was to expand investment in oil and gas
exploration and exploitation and diversify
upstream investors. Awarding the blocks by
public tender broke the state-owned oil companies’ monopoly over upstream exploration and
exploitation, helping the reform process to make
substantial progress.
Competitive bidding was also used to transfer
shale gas and coalbed methane exploration
blocks. Guizhou and Shanxi provinces signed
agreements with the Ministry of Land and
Resources to develop shale gas and coalbed
methane resources. On the instructions of the
Ministry of Land and Resources, the Guizhou
Provincial Government auctioned the Zheng’an
block, where Anye Well 1 is located, in August
2017 to accelerate the exploration and production
of shale gas. Besides Guizhou, other provinces
and regions also selected shale gas exploration
blocks for transfer through competitive bidding.
The Department of Land and Resources of
Shanxi Province transferred the mining rights for
10 coalbed methane blocks (covering a total area
of 2,043 square kilometres) through public bidding in November 2017 to seven local enterprises, including Shanxi Blue Flame Coalbed
Methane Group. This was the first batch of
coalbed methane transferred in China after the
reform of the mining rights system. It motivated
local governments and energised the market.
Many support policies have been introduced
to deepen mining rights reform. The Reform
Scheme of the Transfer System of Mining Rights
and Plan for the Reform of the Mineral Resource
Royalty System was adopted in December 2016.
Its purpose was to promote the transfer of mining
rights through competitive bidding, restrict the
transfer of mining rights through private agreement and build a new mineral resources royalty
system with Chinese characteristics. As stated in
the 13th Five-Year Plan (2016–20) for Natural
Gas, the transfer of exploration blocks through
competitive bidding to eligible market participants in a fair and open manner would help
create an exploration and production system
dominated by large state-owned oil and gas
enterprises, but which would also include private
companies.
5.1.2 Market-Oriented Pricing Reform
is Progressing Rapidly
In China, the natural gas price is administered at
different levels. The city-gate price is administered by the price authorities under the National
Development and Reform Commission (NDRC),
and the sales price after the city-gate station is
administered by local government pricing
Special Report 4: China’s Energy System Revolution
455