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China to allow foreign companies to explore for and produce oil and gas

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As reported by Reuters, for the first time China will this year allow foreign companies to explore for and produce oil and gas in the country, opening up the industry to firms other than state-run energy giants, as Beijing looks to boost domestic energy supplies.

From 1 May, foreign firms registered in China with net assets of 300 million yuan (US$43 million) will be allowed to take part in oil and gas exploration and production, the ministry of natural resources announced at a news conference.

The change will also apply to domestic companies that meet the same condition.

China now imports 70% of the crude oil it refines and nearly half its natural gas consumption, and state firms face an uphill battle boosting reserves and production outside the country amid growing geopolitical risks.

Previously, international companies could enter the industry only via joint ventures (JVs) or cooperation with Chinese firms, mainly state-owned majors such as China National Petroleum Company (CNPC), China Petrochemical Corp (Sinopec) or their listed vehicles.

Mineral resources mining permits will be valid for five years at initial registration, and can potentially be extended for five more.

But firms seeking extensions will have the area of the mining or exploration reduced by a quarter from the levels originally approved, the ministry added.

This new rule will force state firms, which control most of the prospective oil and gas deposits, to cede some acreage, said a government official involved in the reform.

“Compared to previous measures of exploration work commitment, the new rule makes the acreage transfer more efficient and compulsory,” the official said.

But as spending by global firms becomes more disciplined after the 2014 oil crash, and other resource-rich nations such as India and Malaysia look to burnish terms to attract investors, the reform may not lure an immediate flow of foreign investment.

Chinese majors have also tapped most of the best assets onshore and offshore, with the under-explored resources, such as shale oil and shale gas, costly to develop because of their complex geology.

As part of the reform, the ministry said, all mineral resource licenses are to be awarded by competitive bidding and tenders, except for rare earths and radioactive minerals, where licenses will still be strictly controlled.

Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/10012020/china-to-allow-foreign-companies-to-explore-for-and-produce-oil-and-gas/

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