Energy behemoths swear by opening-up

Shorter negative lists for foreign investment and development get thumbs up

China's shortened negative lists in the mining sector, and the lifting of restrictions on the exploration and development of petroleum and natural gas reserves, represent a rare opportunity that is likely to be utilized to the hilt by energy multinationals such as French oil giant Total, Anglo-Dutch behemoth Royal Dutch Shell, British heavyweight BP and international metals and mining company Eurasian Resources Group, industry experts said.

On June 30, China updated two negative lists as part of the government's efforts to improve international cooperation and widen market access.

And from July 30, it will also lift restrictions on the exploration and development of energy resources by Chinese-foreign equity joint ventures as well as non-equity JVs.

"I'm pleased to witness China is pushing forward its opening-up policy. The continuous improvement of business environment for foreign investors gives us more confidence in the future development of China's economy," said William Zhao, chairman of Total's China unit.

"As our business is present across the entire value chain of China's energy industry, I believe the company will gain access to more opportunities in a fairer business environment."

Total is currently undertaking several natural gas projects in China with local partners. These include the South Sulige project with China National Petroleum Corp, the country's biggest oil and gas company, in Inner Mongolia; and the offshore exploration of the Taiyang block in the northern edge of the South China Sea with China National Offshore Oil Corp, China's largest producer of offshore oil and gas.

Total is the first international energy company to conduct offshore oil and gas exploration in China, Zhao said.

As China shifts its energy mix accent from traditional energy to gas and other renewables, Total is actively expanding its natural gas, renewables and energy storage businesses here, he said.

Agreed Zhang Xinsheng, executive chairman of Shell in China. "The progress in the opening-up in the upstream sector is very encouraging as it means more choices and more options for us to invest in the sector and in the country.

"Shell values relationships with local partners in China and would continue bringing its technology leadership and expertise to partners and customers in the future," he said.

BP said recent industry developments in China like the revision of the negative list for foreign investment shows the nation's commitment to opening-up.

"Eliminating the restrictions on joint ventures and cooperation in oil and gas exploration and development, plus introducing multi-market entities (including foreign companies) in domestic oil and gas resource exploration and development, will enhance market activity, create a fair and open access environment, and help further enhance the exploration and development efforts and technological advances of domestic oil and gas resources," said Yang Xiaoping, chairman and president of BP China.

"Meanwhile, the opening-up of access to natural gas-related fields will further promote the development of natural gas in China, to support the nation's low-carbon transformation, and bring more clean energy to the public."

China's oil and gas exploration sector has been long dominated by State-owned enterprises, including China National Petroleum Corp and China Petroleum and Chemical Corp, the world's largest refiner by volume.

Exploration and development of petroleum and natural gas have long been limited to Chinese-foreign equity JVs or non-equity JVs of foreign companies, which include the tight gas development project between French oil giant Total and China National Petroleum Corp in the Erdos Basin and oil giant Royal Dutch Shell's tight gas project in Shaanxi province in cooperation with China National Petroleum Corp.

Pang Guanglian, deputy secretary-general of the China Petroleum and Chemical Industry Federation, said China has always been committed to opening-up, improving the business environment and encouraging foreign investment in the country's key sectors.

The government decided to lift the 30-site limit for international fuel retailers last June, after which many global oil and gas giants, including BP and Royal Dutch Shell, moved to expand their presence in the country, investing in gas stations, he said.

Pang said he believes the recent move shows determination of the government to continue opening-up and will continue to ease market access to foreign energy companies.

Henry Liu, vice-president and general manager of Honeywell UOP China, a strategic business unit of Honeywell's performance materials and technologies group, said the government's shortened negative list will provide more opportunities and a more tolerant business environment for foreign companies in China like Honeywell UOP.

The company will continue promoting its localization strategy and expanding business in the country, he said.

Incidentally, the government has also lifted curbs on foreign investment in the exploration and exploitation of molybdenum, tin, antimony and fluorite.

"This not only demonstrates China's commitment to attracting more foreign investment and establishing a more friendly international trade environment but marks a significant step to bring China's opening-up to a new high," said Benedikt Sobotka, CEO of Eurasian Resources Group.

"It will bring more investment opportunities for foreign mining companies as well."

According to Sobotka, the decision will ease the financial burden of Chinese mining companies in developing these metals and boost international mining companies' cooperation with Chinese partners.

For ERG, easing of foreign investment restrictions in tin and antimony fields, which are China's strategic metals, proves the country has a strong desire to share the fruits of international cooperation and show its determination to sustain the opening-up policy.

"We look forward to seeing more results brought by China's further opening-up," he said.

Analysts believe China's recent moves will bring in overseas capital, technologies and talent, which will likely help upgrade local industries.

"Opening-up and foreign investment will facilitate China to switch from an export-oriented economy to a domestic consumption-driven economy," said Zhu Yi, a metals and mining analyst with Bloomberg Intelligence.

"China's mining industry has been long developed, but some sub-sectors including moly, tin and antimony have the potential to increase their product grade and improve production process," she said.

"Upgrades to produce high-value-added products, improvement of production efficiency, and reduction of hazardous emissions - that will be the focus, going forward, which should benefit from foreign investment."