Bidding opens for Xinjiang oil and gas blocks

Northwestern China's Xinjiang Uygur autonomous region launched bidding on Tuesday for six oil and gas blocks to private enterprises, a move that may end the monopoly of State-owned enterprises in oil and gas exploration, industry insiders said.

The bidding extends beyond State-owned energy giants to qualified Chinese private bidders with net assets of more than 1 billion yuan ($162 million), the Ministry of Land and Resources said in a statement on Tuesday.

The ministry announced that it had decided to transfer oil and gas exploration blocks in Xinjiang through competitive bidding, aiming to expand investment in oil and gas exploration and exploitation and further diversify investment entities in the upstream of the oil and gas industry.

"Public bidding is the first step toward the country's reform of oil and gas exploration and exploitation, and will likely break the domination of the State-owned oil giants in the upstream of the industry," said Wang Kun, director of the ministry's geological exploration department.

"China's oil and gas exploration market has long been closed, compared to the copper ore and iron ore sectors.

"Outsiders can't come in, while insiders are unwilling to invest for some reason," he said, adding that this has resulted in a slowdown in the development of oil and gas exploration.

Four State-owned oil companies－China National Petroleum Corp, China Petrochemical Corp, China National Offshore Oil Corporation and Yanchang Petroleum Group－are qualified to engage in oil and gas exploration.

China is seeking to reform oil and gas exploration and is encouraging more competition in the sector by inviting privately owned companies.

Resource-rich Xinjiang is the pilot region to usher in reform for private enterprises to participate in the upstream and downstream oil and gas exploration and development.

"Xinjiang is the center of the reform because it is where growth in oil and gas exploration is going to come from. Once the upstream business has been opened, the effects of the reform will spread to mid and down stream businesses," said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University.

He said that the reform process will be further accelerated this year with more capital entering the sector.

Xinjiang had proven oil reserves of 5.6 billion tons and gas reserves of 1.4 trillion cubic meters by the end of 2014, according to the annual energy report released by the regional development and reform commission.

These figures both rank first in China, according to the report.