**"Three Barrels and a Half Oil" Control 80% of China's Shale Gas Resources?**
More people are pointing fingers at the "three barrels and a half oil"—PetroChina, Sinopec, CNOOC (China National Offshore Oil Corporation), and Shaanxi Yanchang Petroleum. These companies have long dominated China’s oil and gas sector, and now they’re also controlling the majority of shale gas resources.
According to an official from the land and resources sector, the State Council only approved these four companies to develop oil and gas resources in the past, leaving no room for
OTHERS. This has led to a resource monopoly that persists even after shale gas was officially recognized as a separate mineral.
In the first two rounds of shale gas bidding, it was rare to see these major players participating actively. When they did, their bids were low. Rumors spread that around 80% of China’s shale gas resources are already under the control of these companies, especially PetroChina and Sinopec, who are not particularly interested in exploring unconventional resources.
Industry insiders noted that the blocks offered in the second round of bidding were carefully chosen to avoid overlapping with the existing areas controlled by the “three barrels and a half oil.†These blocks are often in less developed regions, making them harder to exploit.
According to data from the Ministry of Land and Resources, China currently has about 25 trillion cubic meters of recoverable shale gas. Out of this, 20 trillion cubic meters—80%—are located within the oil and gas mining rights zones of the four major companies. The remaining 5 trillion cubic meters lie outside these zones, but they are more difficult to access and develop.
The most favorable shale gas areas, such as the Sichuan Basin, Ordos Basin, and Tarim Basin, are exactly where these companies have established their conventional oil and gas operations. This overlap makes it challenging for new entrants to compete.
Under current policies, companies with existing exploration rights can apply to expand into new minerals like shale gas without needing to go through the full bidding process. This allows the “three barrels and a half oil†to maintain their dominance.
Despite the government’s intention to break the monopoly by designating shale gas as an independent resource, the situation remains unchanged. As one state-owned enterprise executive put it, “It’s like the fat in their bowl is unmovable.â€
By 2010, the Ministry had already allocated five shale gas blocks to these companies, covering over 34,000 square kilometers—more than the total area covered in the first two rounds of bidding. Now, PetroChina and Sinopec have set up demonstration zones and begun exploratory drilling in key areas.
However, despite these efforts, the development pace remains slow. In three years, only around 100 exploration wells have been drilled, with total investment of about 10 billion yuan—far below what’s needed for large-scale commercialization.
Industry insiders note that while the technical potential is there, the financial incentives are not. Unlike the U.S., where shale gas development generated $160 billion in 2005, China’s companies lack the capital and appetite for high-risk, low-margin projects.
Moreover, performance evaluations for central enterprises now focus on asset turnover and economic value added, rather than just growth. This shift makes it harder for companies to justify investing in shale gas, which requires long-term commitment and uncertain returns.
As a result, many private companies and investors are eager to enter the market, but the “three barrels and a half oil†remain cautious, seeing more risks than rewards.
Experts argue that replicating the U.S. shale gas revolution in China is not straightforward. While cost reduction and access to capital are key, China faces unique geological challenges that make U.S. technologies less applicable.
Additionally, environmental concerns, such as water usage and induced seismicity from hydraulic fracturing, add further complexity.
In the long run, the success of China’s shale gas industry will depend on innovation, market liberalization, and the ability to attract social capital. Without these, the so-called “shale gas revolution†may remain just a dream.
But if Chinese companies can overcome these hurdles and develop sustainable, environmentally friendly methods, then the true shale gas revolution could finally arrive.
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