Abstract

Prior to the reorganisation of the energy sector in late 2002 and early 2003, the State Economic and Trade Commission (SETC) held the role of oil industry regulator. However, under the SETC was dissolved and its role of overseeing the energy industry was taken over by National Development & Reform Commission (NDRC). Setting out policy in five-year plans and the setting of crude and oil product prices is the responsibility of the NDRC. The issuance of exploration and production contracts remains the responsibility of the Ministry of Land and Resources (MLR). All oil and gas exploration and production activity in China requires registration and contractual consent from the MLR. Reforms enacted in order to facilitate China's entry into the WTO have considerably altered the structure of the country's downstream oil industry and have pulled back the previously pervasive role of the state. The regulation of wholesale gas prices is the responsibility of the Energy Bureau. For gas reticulation companies, the local government currently awards franchises and sets tariffs. Currently there is no central authority that regulates the gas distributors. China is feeling the pressure to internationalise, their crude imports growing at a record pace and are estimated to reach 3.3 mmbld by 2010. China currently has no strategic reserves and is uniquely vulnerable to geopolitical unrest. China is anxious to diversify imports and reduce dependence on Middle East. The government has led calls for China's NOCs to secure overseas upstream assets. Balancing long term strategic goals with financial drivers has potential conflict of interest between political and market influences but the importance of volume and strategic control of oil supply may out-weigh some of the revenue. Africa, Central Asia, Russia and the Middle East are of rising importance with heavy oil and LNG receiving greater attention. Southeast Asia was the first region China's NOCs entered and currently represents 20% of the NPV of Chinese NOC international assets. The principal focus to date has been on hydrocarbons that link with China, Oil in South East Sumatra (CNOOC), LPG in Jabung (PetroChina), and LNG supply sources in Tangguh & NWS (CNOOC).

Presented at: 2005 South East Asia Petroleum Exploration Society (SEAPEX) Conference, Singapore, 2005