Applied Research On Chinese Shale Gas Private Equity Fund

In recent years,the global clean energy industry,including photovoltaic sector andwind power sector, has declined to the bottom, and shale gas sector begins to emege.From the perspective of worldwide range, market structure of the world natural gasindustry is being shattered by the shale gas revolution, and also the shale gasindustry’s market environment both at home and abroad is changing The price ofshale gas in USA is excessively lower than that in other countries, which not onlydisintegrates OPEC countries and Russia’s control over resources, but also stimulatessome energy consuming countries (including China) to embark on exploitation oflocal shale gas resources. Now, preconditions for commercialization of shale gas inChina are becoming increasingly mature: not just do the volume of shale gas reservesin China ranks the world first place, but also the relative developing technologies,capital, and policies have met the basic conditions for the exploitation of shale gas. Atpresent, China needs to import massive volume of natural gas and its degree ofdependence on petroleum import approaches60%. With kickoff of the second roundof shale gas exploration right now in China, state-owned capital, foreign capital, andprivate capital swarm into shale gas exploration sector. Domestic private capitalregardshale gas as an unprecedented huge goldmine, and local governments insuccession invite merchants to exploit the shale gas. There are three hard nuts inChina’s shale gas commercial exploitation: first, evaluation standards and technicalmethods applicable to China; second, technical barriers in exploitation and high cost;third, lack of enough capital. Herein, capital is a major support for development of theshale gas industry. In general, financing difficulty is the key factor that impedescontinuous implementation and constant development of the shale gas industry.Shale gas investors should make use of their own advantages to seizeopportunities and take challenges, so as to establish private equity investment fund forthe shale gas industry which is the best solution for financing. By purchasing sharesof potential SMEs in the shale gas industry, private equity fund not only providesSMEs with necessary capital for their development, but also assist SMEs in makingadjustment and improvement, reducing business risk, and improving corporate value.Since shale gas industry fund is mostly invested in construction of infrastructurerelating to shale gas, it will drive development of associated industries (including iron&steel, cement, chemical, equipment manufacturing, and engineering constructionetc), contribute to increase of local employment opportunities and taxes, and promotesustainable development of national economy. China has began its researching process in both shale gas industry and the privateequity investment fund industry, but there are few studies on the combination of thesetwo industries. Further study on shale gas private equity investment fund’s theoreticalfoundation and feasibility model will help fill China shale gas industry’s gap infinancing pattern.This paper gives a comprehensive analysis of the social backgroundand industrial background for establishment of China shale gas private equityinvestment fund, as well as systematically analyzes status quo of Chinese listed shalegas enterprises. It researches the investment management of private equity investmentfund from three perspectives: fund raising, investment strategies, and exitmechanism，based on which it proposes establishing a set of feasible shale gas privateequity investment fund model named as” Government assisting and privetconstructing”. In fact, the fundamental value of shale private equity fund is to createvalue. The innovation researching points of this essay are the evaluation of shale gascompanies and pricing method for shale gas private equity fund. It concludes the mostapplicable evaluation and pricing method by using the case in Chongqing as example.At last, it puts forward policy suggestions on establishment of China shale gas privateequity investment fund from such aspects as macro analysis, local government,nongovernmental sector, supervision organ, and agency mechanism and exitmechanism etc. All in all, study on private equity investment fund will be ofimportant theoretical reference and major economic&social value for expeditedcommercialization and exploitation of the shale gas industry.