Business

China opens up oil and gas exploration, production to foreign firms

SINGAPORE/BEIJING : China will for the first time allow foreign companies to explore for and produce oil and gas in the country as Beijing looks to boost domestic energy supplies.

The long-awaited opening comes alongside Beijing's reshuffle in the so-called "midstream" pipeline business, but experts say the policy relaxation may not draw immediate interest from drillers due to overall poor asset quality of China's hydrocarbon resources.

From May 1, 2020, foreign companies registered in China with net assets no lower than 300 million yuan (S$58 million) will be allowed to take part in oil and gas exploration and production, China's Ministry of Natural Resources said.

The change will also apply to domestic companies.

"China is accelerating the sector reform due to growing energy security concerns," said Beijing-based analyst with IHS Markit Zhu Kunfeng.

"Vitalising the industry by diversifying the participants... is the focus of that reform."

China now imports 70 per cent of crude oil it refines and nearly half its natural gas consumption, and state companies face an uphill battle boosting reserves and production outside China amid geopolitical risks.

Before, international companies could enter the industry only via joint ventures or through cooperation with Chinese companies.

Also as part of the reform, the ministry said licences for all mineral resources will be awarded through competitive bidding and tender process with the exception of rare earths and radioactive mineral resources, where licences will still be strictly controlled. - REUTERS

BUSINESS & FINANCE