On the morning of July 7, the Ministry of Natural Resources issued a tender announcement on its portal website for oil and gas exploration blocks in Xinjiang, marking the launch of a pilot reform in the upstream oil and gas sector, with Xinjiang serving as the testbed. This tender is expected to put an end to the long-standing situation in China’s upstream oil and gas sector, in which state-owned oil companies have enjoyed exclusive control. Industry insiders commented that this move will officially kick off China’s “ice-breaking journey” toward reforming its oil and gas exploration and production system.

　　The six blocks under this public tender are: oil and gas exploration in the Burqin area of the Burqin Basin in Xinjiang; oil and gas exploration in the Yumin area of the Tacheng Basin in Xinjiang; oil and gas exploration in the Gongliu area of the Ili Basin in Xinjiang; oil and gas exploration in the northern Keping area of the Tarim Basin in Xinjiang; oil and gas exploration in the Kashgar Shule area of the Tarim Basin in Xinjiang; and oil and gas exploration in the southeastern Lop Nor area of the Dunhuang Basin in Xinjiang. The total area covers 14,900 square kilometers.

　　According to a representative from the Department of Mineral Development Management of the Ministry of Natural Resources, the sixth meeting of the Central Financial and Economic Leading Group in 2014 proposed promoting four major reforms—on energy consumption, supply, technology, and institutional framework—and laid out plans for reforming the oil and gas exploration and production system. The goal is to remove institutional barriers, intensify domestic oil and gas exploration and production efforts, and firmly grasp the initiative in ensuring energy security. To this end, the State Council has decided to launch a pilot program for oil and gas exploration and production reform first in Xinjiang, a region with significant potential for oil and gas resources. The primary objectives of this pilot program are: opening up the market, ensuring equal access, stimulating market vitality, increasing investment in oil and gas exploration and production, and exploring a new market-oriented economic system that is open, competitive, and orderly—thus providing valuable experience for the next stage of comprehensively deepening the reform of the oil and gas exploration and production system.

　　According to the introduction, the main components of this pilot reform for oil and gas exploration and production in Xinjiang include: First, oil and gas exploration bidding blocks will be released to the public in a planned, phased manner. Among the six blocks open for public bidding, any enterprise meeting the eligibility criteria can participate; the enterprise that commits to carrying out the largest volume of exploration work will win the bid. The winning enterprise must submit a performance bond equivalent to 10% of its committed investment before receiving the exploration license and obtaining the prospecting rights. After the three-year validity period of the prospecting rights expires, the relevant authorities will assess the enterprise’s exploration investments. If the enterprise has fulfilled its committed exploration workload, its prospecting rights will be renewed for the original area. If the enterprise has failed to meet its commitment, the performance bond will be enforced proportionally to the unfulfilled portion, and the block area will be reduced accordingly before the prospecting rights are renewed.

　　Second, we will promote cooperation among Xinjiang enterprises in oil and gas exploration and production. We will actively coordinate with and support Xinjiang enterprises in establishing win-win, mutually beneficial mechanisms for cooperation and shared interests with CNPC and Sinopec. Within the mineral rights blocks held by these petroleum companies, we will encourage joint ventures and cooperative arrangements to carry out oil and gas exploration and production.

　　Third, we will support local economic and social development. In the bidding for oil and gas exploration blocks, when enterprises commit to the same level of exploration work volume, Xinjiang-based enterprises will be given priority in obtaining these blocks. Once the winning enterprise begins production, it shall register a company in the resource-rich area. The state will intensify its efforts in basic geological surveys of oil and gas resources in Xinjiang, further clarifying the extent of our resource reserves.

　　Fourth, we will improve the management system. We will refine the system for allocating oil and gas exploration blocks and explore a competitive bidding system that not only suits the unique characteristics of oil and gas exploration and production but also fully leverages the decisive role of market mechanisms in resource allocation. We will also ensure that local governments fulfill their responsibilities for safety and environmental protection oversight, thereby fostering an orderly and law-based exploration environment. Local governments at all levels in Xinjiang will earnestly play their regulatory roles: on the one hand, they will treat oil and gas exploration and production as key areas for safety production and environmental protection oversight, improving relevant systems and ensuring accountability; on the other hand, they will strengthen supervision, inspection, and enforcement efforts to maintain order in oil and gas exploration and production and safeguard the legitimate rights and interests of mineral rights holders. On this basis, we will provide effective coordination and services to ensure the smooth progress of exploration activities.

　　Fifth, summarize the experience and promote it comprehensively. Through pilot programs, promptly identify institutional experiences that are replicable, scalable, and conducive to legislative improvements, and roll them out nationwide at an appropriate time.

　　A responsible official from the Department of Mineral Resources Development Management stated that, in the next step, the Ministry of Natural Resources will also systematically and publicly release oil and gas exploration blocks in Xinjiang to the public.