CHINA, estimated to hold more natural gas trapped in shale than the United States, will offer subsidies and auction new exploration blocks this year to encourage domestic companies to tap the resource.

"The government places high emphasis on developing shale gas and has been actively studying supporting policies," Zhang Dawei, vice head of the Strategic Research Center at the Ministry of Land and Resources, said in Shanghai yesterday. A national shale gas plan will be announced soon, he said.

More than 10 shale gas blocks will be offered to Chinese state and private companies in the second round of auctions, Zhang said at a conference.

While overseas companies will be barred from the sale to be held this quarter, they can invest in and supply technology to domestic operators, he said.

Cnooc Ltd and China Petrochemical Corp are seeking technology through overseas acquisitions. PetroChina Co's parent agreed in June to form a venture with Royal Dutch Shell Plc to improve its drilling efficiency after taking 11 months to complete China's first shale well. China, yet to produce any shale gas commercially, plans 6.5 billion cubic meters of annual output by 2015 and 80 billion cubic meters by 2020, Zhang said.

The subsidy for shale gas will be higher than the 0.20 yuan (3 US cents) per cubic meter provided for coal-bed methane, because gas is harder to extract from shale rock, the official said.

Chinese shale may hold 36 trillion cubic meters of gas, or 12 times the country's conventional natural gas deposits, the US Energy Information Administration said in April. China's "technically recoverable" reserves are almost 50 percent more than the 24.4 trillion cubic meters held by the US, the EIA said.

China estimated in 2010 that it had about 31 trillion cubic meters of exploitable shale gas reserves, and the figure will be updated by the end of this year as the government has done nationwide onshore appraisal, Zhang said yesterday.

Shale gas production in China may rise to 15 percent of domestic output by 2040, against 50 percent by 2030 in the US, Steven W. Lewis, a professor at the Baker Institute at Rice University, said at the conference.