China Initiates Huge Private Participation in Energy Sector

Last week China has announced that it would accept public bidding for national oil reserve projects, indicating that the government is planning private participation in energy domain to cut state's sole responsibility of generating energy to feed the growing demands. Sources say that the state is expected to even encourage private investments in wind, solar, biomass and other clean energy, including permissible areas of nuclear power plants.

China's State Council on its last Thursday's release said the government encouraged private investment in domestic oil and gas exploration and crude oil, natural gas, refined oil storage and transportation and pipeline transportation facilities and networks. China’s strategy to bring private players to the energy sector in a big way is regarded as an attempt to support its economy that is projected to grow more than 10 percent, eventually increasing energy needs.

Zhao Youshan, head of the Commercial Petroleum Flow Committee of China, opined the involvement of private oil enterprises in the national strategic reserve of oil could relieve the pressure of oil exploration and production to some extent. Currently, all prospective domestic oil and gas blocks are owned by the state. The new oil and gas directive is likely to allow private enterprises to have significant stake in domestic oil and gas exploration as well as production.

According to Beijing Times, the enterprises bidding for the project should meet certain criteria, such as the volume of a single oil storage tank should be no less than 10,000 cubic meters. Though the reserve capacities of private enterprises are comparatively small, the private players seemed to be eager to join the national oil reserves with state support including finance, infrastructure and easily adaptable laws.

At present, the private enterprises involved in the supply of crude oil is very limited since they are stipulated to import 2,530 tons of crude oil per annum or about the daily imports 500,000 barrels. However, the private participation in oil and gas sector comes at a time when the country plans to augment the use of non-fossil fuels from the current 8.5 percent to 15 percent by this year end.

By Jose Roy