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

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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.

The long-awaited opening accompanies a reshuffle of the so-called “midstream” pipeline business, but experts say it may not excite immediate interest from global drillers because of the poor overall asset quality of China’s hydrocarbon resources, according to Reuters.

From May 1, foreign firms registered in China with net assets of 300 million yuan ($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 is accelerating the sector reform due to growing energy security concerns,” said Zhu Kunfeng, the Beijing-based associate director of upstream research at IHS Markit. “Vitalising the industry by diversifying the participants, including foreign and private investors, is the focus of that reform.”

China now imports 70% of the crude oil it refines and nearly half its natural gas consumption.

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