China will open its arms for foreign oil and gas companies, and for local private E&Ps, the country’s Ministry for Natural Resources told media as quoted by the China Global Television Network.
The move will “stimulate market vitality” the media quoted the official as saying.
Reuters added that there will be certain limits on who will gain access to China’s oil and gas deposits. According to the Ministry of Natural Resources, these will be companies with net assets worth no less than $43 million.
China has been actively looking for ways to boost domestic oil and natural gas production to alleviate its dependence on imports. However, this has proved difficult to do relying only on the state-owned energy giants.
The change, effective May 1 this year, has been eagerly awaited by the industry because although China is home to some 25.7 billion barrels of proven oil reserves, a lot of it is locked in geologically challenging formations. What’s more, natural depletion at many of its developed oil fields is taking its toll, driving an overall decline in domestic oil production.
“China is accelerating the sector reform due to growing energy security concerns,” an IHS Markit analyst told Reuters. “Vitalising the industry by diversifying the participants, including foreign and private investors, is the focus of that reform.”
China currently imports about 70 percent of the crude oil it processes. That’s too high a level for comfort, especially right now, with tensions running high in the Middle East, which is one of China’s largest suppliers of crude. Developing domestic resources seems quite urgent.
The change effected by Beijing will allow foreign companies to explore and develop oil and gas fields in China without setting up a joint venture with a Chinese company – a rule until now. This, according to Reuters, means the state oil giants will have practically have to cede some of the oil and gas assets they control by virtue of being state companies to private companies.