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China’s power Generators Eye Shale Gas To Drive Down Cost

China’s power generating companies show strong desire to tap the nascent shale gas business in order to get alternative fuel and drive down generating cost, said a report by Shanghai Securities News on Monday.

All Chinese five state-owned power generating companies and some local power companies have expressed their intention to participate in the upcoming 2nd round auction of the exploration rights of shale gas blocks, said the report.

Firstly open to private investors and nontraditional players, the planned 2nd round of auction is expected to take place in September with more than 70 companies having expressed interest to participate.

Dominated by thermal power, China’s electricity generating companies have strong demand for upstream resources, aiming to reduce their dependence on coal miners.

The substantial utilization of shale gas in power generation will help rein in surging coal prices, provide more options on raw materials and improve efficiency via co-business of electricity and gas.

By contrast, few coal miners show willingness to participate in the auction of shale gas blocks except Shenhua Group Corporation and China National Coal Group Corporation.

China held its first round of shale gas auction of four blocks in June, 2010. Six state-owned companies were invited, including PetroChina (PTR.NYSE; 601857.SH; 0857.HK), Sinopec (SNP.NYSE; 600028.SH; 0386.HK), CNOOC (CEO.NYSE; 00883.HK), Shaanxi Yanchang Petroleum Group, China United Coalbed Methane Corporation and Henan Provincial Coalbed Methane Development and Utilization Co., Limited.

With 25.08 trillion cubic meters of onshore shale gas resources excluding Qinghai and Tibet, China aims to produce 6.5 billion cubic meters of shale gas in 2015.

Xinhua News Agency, 13 August 2012