China's vast oil fields to open to foreigners

September 07, 1992|By Robert Benjamin | Robert Benjamin,Beijing Bureau

BEIJING -- China, under pressure to develop its oil productio capabilities more rapidly, is about to drop its long-standing ban on foreign oil firms working in its inland oil fields.

The major policy shift may open parts of the vast Tarim Basin in China's far northwestern Xinjiang Uygur Autonomous Region to foreign exploration.

The basin may be one of the world's largest untapped oil fields, and most major foreign oil companies have lusted after the chance to work there for years.

Chinese petroleum officials plan soon to open oil fields in eastern China for the first time to foreign exploration and those rights may be extended much farther inland to Xinjiang, according to a report last week in the state-run English-language paper China Daily.

This plan has not yet received central government approval, but oil officials already are set to travel this month to the United States to discuss it with U.S. companies, the official paper said.

Also, Japanese industrialists visited the Tarim Basin recently to discuss cooperative oil-development efforts, the paper said.

These official statements conform with what Chinese officials have been privately indicating to Western oil company representatives.

"There's been a lot of movement going on for the last few months because petroleum officials are under political pressure" get in step with Chinese patriarch Deng Xiaoping's accelerated economic reform drive this year, said a Western diplomat here who closely follows the Chinese oil industry.

But foreign oil company managers are reacting cautiously to the policy shift.

"It's going to happen, but very slowly," said the head of a Western oil firm's office here. "And they're not going to open whole areas, only just parts of areas."

In the end, the opening of China's inland oil fields may not be quick enough to suit some Western companies.

"Their timing already may be too late," said a second foreign oil executive here, noting that new exploration opportunities are rapidly opening in Russia and Vietnam.

"Every oil company has had its eyes on the Tarim Basin for years and is eager to get in there," said another Western oil company manager, who, like his colleagues, would only speak anonymously.

How much oil may exist beneath the Tarim Basin -- which encompasses the huge, forbidding Taklimakan Desert -- is not ++ known.

Earlier this year, China claimed that the basin's reserves total as much as 15 billion tons, or five times China's proven reserves and more than one-tenth of the world's total proven reserves.

But independent oil analysts all say sufficient geological surveys have not been done to back up this estimate.

And some say the work so far indicates the basin is not as promising as once believed.

Even if the isolated area's reserves are as large as China claims, its difficult working conditions and the need to construct the world's longest and costliest pipeline to bring its oil to Chinese markets would require billions of dollars of investment.

The size of that investment and China's increasing need for oil to fuel its rocketing industrial growth likely prompted officials to reconsider their long-standing stance against allowing foreign companies working in virtually all of its inland fields.

Foreign companies have been allowed to work some of China's offshore fields and very few inland areas in southern China, but self-reliance has been a key ideological position of China's oil industry since the opening of the large Daqing oil field in northeast China in the 1950s.

Daqing was offered here for decades as a political model of the self-reliance that other developing Chinese industries should emulate, a model that has been increasingly ignored in China since the early 1980s with its growing quest for foreign capital and technology.

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