China for the first time auctioned off shale gas exploration right to a 695 square kilometer swath of land in Southwestern China's Guizhou province, Guizhou Provincial Department of Land and Resources announced on August 18.

Guizhou Industrial Investment Corporation won the bid after beating the other three candidates, ending up closing the deal at 1.29 billion yuan ($193.5 million). The bid winner needs to pay at least another 760 million yuan for early exploration expenses.

The shale gas block, located in Anchang town, Zhengan county, covers an area of over 695 square kilometers. Burial depth of the gas is between 1,500-3,500 meters. The shale gas reserves are expected to reach 100 billion cubic meters.

In 2016, the No.1 Anye mine at the block has realized daily output of stable industrial flow at 100,000 cubic meters.

The auction comes as the country's efforts to get rid of dependency of coal, which constitutes about 60% of China's energy mix but leads to increasing worries about air pollution and other environmental issues.

With the largest shale reserves in the world, China becomes one of the biggest worldwide producer behind Canada and the US. However, its ability to harness its resources has been hindered by geological complexity.

Geological data shows China's shale deposits are generally buried as deep as 3,000 meters and below in hilly and plateau region, while those in the US store in plain area with depth of 1,000-2,000 meters.  

As such, China has to import about 30% of its gas, which is expected to make up 10% of its energy consumption by 2020.

Even though China's efforts to bolster domestic production of natural gas, particularly shale gas, have led to marked increases, production is not expected to surpass domestic consumption anytime soon.

(Writing by Alex Guo  Editing by Tammy Yang)
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