Opening Chinese Shale Gas Production

ConocoPhillips on Sept. 11 became the latest Western oil major to announce plans to expand operations in China to include the country's still-infant shale gas sector. The company's announcement was both vague and well-timed. China is in the midst of its second tender for shale gas blocks. But unlike the first, invitation-only tender, in which just six state-owned enterprises were allowed to bid, the current round has already drawn more than 75 applications from a variety of companies, both state-owned and private, as well as local governments. Many bidders, such as the privately owned Zhongtian Urban Development Group or the Chongqing municipal government, have little to no experience in the energy sector.

More important for ConocoPhillips and its competitors, though, is that the current tender — which closes Oct. 25 — is the first to allow foreign energy firms to jointly bid as minority partners with Chinese companies. As Beijing moves to rapidly develop the country's shale gas sector, it will have to balance the need for greater participation from foreign and non-state players with its own imperative to maintain central control over its slowing economy.