Daanzhai, Fuling, on the southeastern edge of the Sichuan Basin will be the source of 1.1 billion cubic meters of shale gas production, Sinopec Group vice president Cao Yaofeng announced yesterday. Upon exploration of the field, Sinopec is predicted to yield 300 million cubic meters and a total of 1 billion cubic meters of output through the remainder of 12th Five-Year Plan (2011-2015).

The Ministry of Land and Resources announced on Jan 21 the results of the second round of shale gas exploration rights, with 16 firms winning bids on 19 plots, covering 20,000 square kilometers. According to the announcement, 12.8 billion yuan will be invested in the exploration over three years.

"Private companies, foreign enterprises and joint ventures are all allowed to participate in the bidding process, which shows the opening up of the shale gas market and accelerates the exploitation," said one insider. "It is also considered to be a key revolution in China's energy industry."

What's more, a series of support policies that are in the process of being rolled out, including subsidies from the government, are expected to stimulate the shale gas exploration.

However, systemic reform is the biggest obstacle for China's shale gas development, according to Pu Deqin, an analyst with the electronic commodities platform 315.com. Since the regulatory system is still weak, the government should put more efforts in supplementary measures such as network, transportation, capital management and environmental protection.