China said it aims to open up oil and gas exploration to private and foreign firms, offering further details of a policy that would help assuage concerns over access to the industry ahead of next week’s signing of an interim trade deal with the US.
Companies with net assets of at least 300 million yuan (US$43.15 million) can apply for licenses as part of “a major reform,” the Chinese National Energy Commission (NEC) said at a briefing yesterday.
Previously, only state-owned firms were eligible for permits, an approach that retarded efforts to expand domestic production and cut its enormous import bill.
China has in the past two years adopted a substantial number of measures to help ease commercial frictions with the US, including opening up its financial sector to foreign ownership and taking steps to ban forced technology transfers.
Oil and gas was one of the sectors removed from the list of industries that restrict overseas investment in July last year.
The latest details from the NEC helped lift the stocks of a swathe of firms that service exploration and production in China.
While the nation’s three major state oil firms have raised spending to boost output, China’s crude imports have continued to break records.
Its gas imports have also grown apace, as the nation seeks to swap out dirty coal for the cleaner burning fuel across residences and industry.
“The sluggish growth of oil and gas production in China was partly due to the monopolistic nature of the upstream segment,” said Dennis Ip (葉捷賢), a power sector analyst at Daiwa Capital Markets Hong Kong. “The government’s intention is to introduce competition and encourage technological innovation in the E&P [energy and power] segment, and we believe this can help to lower the production costs of upstream players over the long run.”
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