OREANDA-NEWS. July 21, 2011. China could allow private businesses to bid for shale gas exploration permits, but not foreign companies, an official at the Ministry of Land and Resources said.

On the same day, the land ministry signed contracts with state firms Sinopec Corp. (SHSE: 600028) and Henan Provincial Coal Seam Gas Development and Utilization Co., granting them the rights to explore shale gas in China's southwestern regions.

It was the first time that the ministry invited tenders for shale gas exploration, aiming to introduce market competition into the industry, Zhang Hongtao, chief engineer at the ministry, said at the contract-signing ceremony.

Zhang Dawei, vice director of the Oil & Gas Resources Strategic Study Center under the ministry, said private companies are likely to be included in the next round of bidding invitations.

Exploration for shale gas, natural gas extracted from shale, has been gaining momentum in recent years amid rising oil and gas prices worldwide.

China has far more shale gas reserves than conventional natural gas, but its development is still at an initial stage due to technological restrictions.

The land ministry projected that China's shale gas annual production will reach 15 to 30 billion cubic meters by 2020 and hit 110 billion cubic meters by 2030, accounting for 25 percent of the nation's total natural gas output by then.