China Offers Private Companies Rights to Explore Six Oil-and-Gas Blocks

China Oil and Gas

BEIJING—China’s government is offering private companies the rights to explore six oil-and-gas blocks in a small step toward opening the nation’s energy resources to private investment.

The Ministry of Land and Resources said Tuesday that the pilot program would offer access to onshore blocks in China’s far northwest Xinjiang region, which has ample reserves but where commercial extraction is difficult due to its remote location and complex geology.

The announcement marks a step forward for promised reforms of China’s state-dominated oil-and-gas sector. Those reforms have been slow-moving; so far they have included opening up the Sinopec unit that operates gas-station convenience stores to private investors. Questions remain about how far the government is willing to go in letting private companies into the sector and in challenging the dominance of China’s behemoth national oil companies.

In its Tuesday statement, the resources ministry said participating companies must have at least 1 billion yuan in net assets ($161 million). That, in effect, excludes many small companies from bidding. The trial program could potentially be attractive to China’s independent refiners and other larger companies involved in the sector. The blocks are located in several areas of Xinjiang, including two in the Tarim Basin, a major production zone for CNPC.

Last year, China was the world’s fourth biggest oil producer behind Russia, Saudi Arabia and the U.S., producing more than 4 million barrels a day.