China plans to offer operators a financial incentive for the exploration and development of shale gas, the Ministry of Finance said Monday on its website.
The notice, issued by the finance ministry and the National Energy Administration and dated November 1, said companies will receive a subsidy of Yuan 0.4 (6 cents)/cubic meter of shale gas production from 2012 to 2015.
It said that the "subsidies will be adjusted according to the development of the shale gas sector," adding that finance bureaus at the local government level will be able to set appropriate subsidies according to the pace of gas utilization and development in each region.
Applications for funding have to be submitted to the local finance bureaus before end-January every year. Companies also have to submit reports on the previous year's development plans, including coring and logging data.
The central government has set an official target for shale gas production in China to reach 6.5 Bcm/year by the end of 2015, from zero currently. This is an ambitious target given the various geological and above-ground challenges, including lack of drilling technology and mid-stream infrastructure to bring the gas to market.
In the second bidding round for shale gas blocks, which closed late last month, the Ministry of Land and Resources said it received 152 bids from 83 companies for the 20 blocks on offer.
Beijing had been mulling incentives similar to that currently extended to coalbed methane operators for shale gas to encourage accelerated development and production.
CBM producers currently receive Yuan 0.2/cu m of production from the central government, as well as fully refundable value-added tax of 13%. They are also exempt from import tariffs on certain drilling equipment. CBM prices to end-users are also negotiated directly between buyer and seller and are not regulated by the government.
