Auction of oil, gas sites to boost energy exploration in Xinjiang

China is accelerating its efforts to open up upstream oil and gas resources by auctioning five more oil and gas exploration sites in the Xinjiang Uygur autonomous region.

This will be the third auction of oil and gas sites in the resource-rich northwestern region to privately owned firms and another step in opening up a sector largely monopolized by State-owned enterprises to private players.

The five new sites, located in Xinjiang’s Tarim basin, have a combined area of more than 9,000 square kilometers and will be opened to bidders through five-year exploration permits, instead of the threeyear permits offered in 2015, the Ministry of Land and Resources said on its website.

But the new round of bidding will still be restricted to investors fulfilling certain criteria.

The investors should be mainland-registered independent legal entities with at least 1 billion yuan ($151 million) in net assets. They must have healthy financial conditions and agree to independently bear the costs and risks of production, the ministry said.

In January, the Department of Land and Resources of the Xinjiang Uygur autonomous region announced it planned to auction around 30 oil and gas blocks this year.

After much consultation, three major State-owned oil giants, namely the China National Petroleum Corp, China Petroleum & Chemical Corp, also known as Sinopec, and China National Offshore Oil Corporation, agreed to relinquish their exploration work in around 30 blocks of oil and gas fields in Xinjiang, covering 300,000 square kilometers.

In July 2015, the ministry opened six blocks in Xinjiang in its first tender to attract non-State investors. Shandong Polymer Bio-chemicals Co Ltd was awarded one block and State-owned Beijing Energy Investment Holdings won the bidding for three blocks.

Prior to this, upstream oil and gas assets in the country were almost exclusively controlled by the large Stateowned energy companies.

The announcement marks a step forward for promised reforms of the State-dominated oil-and-gas sector, said Lin Boqiang, director of the Energy Economics Research Center at Xiamen University.

“Those reforms have been slow-moving, because it involves complicated interests and concerns the country’s energy security,” Lin said.

Although Xinjiang has ample energy reserves, commercial extraction is difficult due to its remote location and complex geology. The recent gas shortage will encourage more enterprises, Stateowned or private, to carry out more gas exploration to meet public demand, he added.

Han Xiaoping, chief information officer of China Energy Net Consulting, said that lack of funding has always been an obstacle to oil and gas exploration in Xinjiang.

The move will break the monopoly of State-controlled companies and ensure sharing of resources between private and State-controlled companies.