Chinese investors focus on Australia's shale gas

Reliable economic reserve figures for shale gas were not available, largely because there has been little or no exploration or drilling in most basins, the report said.

It estimated that companies will invest about $500 million in shale gas development in Australia in the next two years.

"China has been investing in Australia, and we expect such investments to continue to grow, especially in the oil and gas sector," said Rathvon.

"However, there are also issues that the companies have to consider when looking at investing. One is the cost of converting natural gas into LNG, and the other is that labor costs in Australia are higher than they are in the US."

As China's natural gas consumption continues to rise due to economic growth and the government's commitment to carbon reduction, alternative energy sources, such as shale gas, have grown in popularity.

However, China's shale gas exploration is still at a preliminary stage, with issues in terms of geological condition, water consumption and technology.

China's shale gas development faces several obstacles, said Li Boshu, a senior researcher with the domestic energy information and consulting service provider China Energy Net Consulting Co.

A lack of supervision and management in the sector is the biggest issue, and the country doesn't have a clear plan for its shale gas development, Li said.

"I don't think subsidies can ensure the success of an industry," Li said. "Although China has carried out subsidies relative to shale gas development, I'd consider it as a positive signal for the industry that the government encourages companies to participate in the sector."