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In a major move to boost domestic energy production, the UK Treasury announced on July 19 that it will slash the shale gas development revenue tax rate from 62% to 30%. This significant reduction aims to encourage more investment in shale gas exploration and production, helping meet the country’s growing energy needs. With this policy, the UK is now offering one of the most favorable tax regimes for the shale gas industry globally, as many countries still maintain higher rates around 62%.
The U.S. has long been at the forefront of the shale gas revolution, often promoting the idea of "energy independence." The term "shale gas" has become synonymous with this energy shift, driving both economic and geopolitical changes.
According to the U.S. Energy Information Administration (EIA) in 2011, global shale gas resources were estimated across 33 countries. The U.S. and China stood out, with recoverable reserves reaching 24 trillion cubic meters and 36 trillion cubic meters respectively, making them the top two nations in terms of potential shale gas reserves.
China has also recognized the strategic importance of shale gas and included it in its “Twelfth Five-Year Plan.†The plan outlines ambitious goals, including identifying 30 to 50 shale gas prospects and 50 to 80 favorable areas by the end of the period. It aims to achieve 200 billion cubic meters in recoverable reserves and increase annual production to 6.5 billion cubic meters by 2015. By 2020, the target is to reach 100 billion cubic meters per year.
To support this growth, the National Energy Administration has introduced new policies, such as reducing or exempting fees for exploration and mining rights. Additionally, the government has launched a three-year subsidy program, offering 0.4 yuan per cubic meter to shale gas producers. The Ministry of Land and Resources is also preparing for a third round of shale gas bidding, which is expected to begin later this year, with a larger scale than previous rounds.
Analysts from Guohai Securities highlighted the key segments of the shale gas supply chain, starting from upstream exploration and design, through midstream drilling and production, to downstream storage and transportation. Companies like Hengtai E&P and Hengxin, involved in seismic analysis, are among the early beneficiaries. Meanwhile, Haimo Technology, providing oilfield services, and Jiangling Shares and Honghua Group, supplying drilling equipment, are also positioned to benefit.
Jereh Co. and Shenkai Co., which produce fracturing equipment and inclinometers, have strong growth potential due to limited competition and high profit margins. In the storage and transportation sector, Furui Equipment, with expertise in cryogenic technology, is gaining attention.
Several listed companies have already entered the shale gas market. For instance, Huatai Shanxi Energy Investment secured a bid for shale gas exploration in Guizhou, while Shenhua Geological Prospecting won a contract for the "Palace Block" in 2012. Kaidi Power also established a subsidiary focused on shale gas and signed an agreement with the Hubei Coal Geological Bureau.
According to WIND data, several shale gas-related stocks have shown strong performance, with net profit growth exceeding 30% year-on-year. These include Jereh, Zhunyou, Himo Technology, Hubei Energy, and others. Some of these companies have also seen significant stock price increases this year, indicating investor confidence in the sector's future.