China’s oil, gas market set for full opening

By Ma Jingjing and Wang Sheng Source:Global Times Published: 2020/1/9 20:08:40

Reliance on imports expected to be cut under policy change


A drilling machine works in the Yingdong field of Qinghai Oilfield Co, a subsidiary of China National Petroleum Corp (CNPC), the country's largest oil and gas producer and supplier. Photo: cnsphoto

China will fully open its petroleum and natural gas exploration and development market, allowing more private and foreign firms to enter the sector, in a move to increase energy supply capacity amid rising tensions in the Middle East.

Any domestic or foreign company that is registered in the Chinese mainland and has net assets of more than 300 million yuan ($43.18 million) is qualified to obtain mining rights, said the Ministry of Natural Resources (MNR) Thursday, China Central Television (CCTV) reported.

Besides having technological capacities, companies engaged in the energy exploration and development sector should comply with security, environmental protection and other requirements, according to the ministry.

The latest move will change the dominance of state-owned enterprises and stimulate market vitality, CCTV reported, citing Yao Huajun, head of the Mining Rights Management Department at the MNR.

Liu Yijun, a professor at the Beijing-based China University of Petroleum, said the move is a milestone in the sector, indicating China's firm determination to carry out comprehensive opening-up.

"Previously, China's reform of the petroleum and natural gas sector focused on the downstream sector, including oil refining, foreign trade and the wholesale of refined oil. As petroleum and natural gas resources and mining rights are closely related to a country's energy security, China has always maintained a cautious attitude," Liu told the Global Times.

In the 2019 version of negative list released in June, China canceled the restrictions that the exploration and development of petroleum and natural gas were limited to Chinese-foreign equity joint ventures or non-equity joint ventures.

Raising exploration and development capacity is conducive to reducing China's foreign oil and natural gas reliance, according to experts.

Being the world's second-largest economy, China heavily relies on petroleum and natural gas imports. According to a report released by the Economic and Technology Research Institute of China National Petroleum Corp (CNPC) in 2019, China's foreign oil dependency ratio reached 69.8 percent in 2018 and the foreign natural gas dependency ratio was 45.3 percent.

China imported 4.62 trillion tons of crude oil in the first 11 months of 2019, up 10.5 percent year-on-year, showed data from the General Administration of Customs. Imports of natural gas reached 87.11 million tons, up 7.4 percent year-on-year.

Freeing up mining rights is unlikely to change the structure of the upstream of China's oil and natural gas sector in the short term, but it would accelerate its marketization and boost industrial competition, Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, told the Global Times.

According to China's Mineral Resources Law, companies have to meet certain qualifications to engage in the exploration and development of mineral resources, under which only a handful of state-owned enterprises including CNPC, China Petroleum and Chemical Corp and China National Offshore Oil Corp could qualify.


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