China's National Energy Administration (NEA) has welcomed private enterprises' participation in shale gas exploration and development in natural gas regions, reports Shanghai's First Financial Daily, citing Yang Lei, deputy director general of the NEA's Oil and Gas Department at a recent forum.

Upstream oil and gas resources were initially controlled by state oil giants China National Petroleum Corporation (PetroChina) and China Petrochemical Corporation (Sinopec), along with China Shipping, while other private enterprises were unable to obtain independent permits for exploration. This changed in 2011 following the establishment of a bidding process, and as long as enterprises met the requirements stipulated by the country's Ministry of Land and Resources, they can tap into the upstream oil and gas reserves.

Around 70% of China's natural gas resources belong to PetroChina and Sinopec through a registration system and the areas that have been made available for second-round bidding are generally considered to be in poor geological condition and involve higher risks in exploration. Meanwhile, the number of private enterprises that have obtained the rights to explore shale gas resources through the bidding process is limited.

The government began formulating its shale gas industry policy last year, but has yet to officially unveil it. Yang explained that this was because domestic experience in the development of shale gas was insufficient and that the government could not formulate a policy in haste.

During the initial stages, Beijing was more concerned about the technology involved in the exploration of shale gas, but sources said that drilling cycles have now been shortened to 70 days from the previous 170 days last year. Yang said that China's overall policy was not perfect, but it would not act as a hurdle in shale gas exploration and development.

Official figures revealed that the costs of drilling a shale gas well has slipped to around 50 million yuan (US$8.2 million), compared with the 80-100 million yuan (US$13.2 million-$16.4 million) reported last year, the paper said.