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The country’s National Energy Administration announced increased funds for shale gas exploration and tax reductions for explorers and producers while unveiling the 2011-2015 plan.
China is believed to hold the world’s largest deposits of shale gas but has not yet begun commercial production.
The Ministry of Land and Resources said last year the Asian nation had estimated shale gas reserves of 134 trillion cubic metres, of which 25 trillion is extractable.
The reserves are trapped in formations previously thought to be unreachable.
The official document released on Thursday offers general policies regulating the sector, but is yet to spell out specific details.
A domestic shortage of gas supplies and longer term plans to prioritise gas-fired energy production as part of an anti-pollution battle in China has led to calls to exploit shale gas.
The Ministry of Land and Resources has launched two shale gas tenders – one in 2011 and the other in 2012 – in a bid to attract more developers into the industry.
However, Thursday’s document said the sector should not be developed at the cost of the environment and has banned shale development in nature reserves, scenic spots and areas with a rich drinking water source.
Unrestricted exploration and mining of China’s rare earth industry has caused extensive damage to the environment.
Chinese experts have said the government has not supported the industry by implementing the right policies.
The government’s output volume-based subsidy programme has been criticised as ineffective.
Shale gas development needs huge capital investment in the exploration stage, a pre-production subsidy would definitely make more sense, said Zhang Yousheng, a researcher at the Energy Research Institute of the National Development and Reform Commission, China’s top planning agency.
Analysts have also questioned China’s capabilities of meeting shale gas production targets of 6.5 billion cubic metres by 2015 and 60-100 billion cubic metres by 2020.
The new plan does not mention production targets for the world’s biggest energy consumer during the five year period.