PetroChina has broken the longstanding de facto monopoly of China National Offshore Oil Corp. (CNOOC) in offshore oil prospecting and production.

The Ministry of Land and Resources issued a license on July 6 to PetroChina for offshore oil exploration, a move described as a landmark event, The Economic Observer reported on Monday.

China's three biggest oil companies are all expanding their oil exploration businesses. PetroChina, the largest oil producer, has so far confined its oil-related activities to the land, although it is not legally or administratively bound to do so.

In return, CNOOC has limited to its oil-related activities to offshore oil exploration and production, although it also has been free of restrictions.

Analysts say PetroChina's expansion into offshore oil exploration and production is a move to prop up output.

The company, which operates the Daqing Oilfield -- China's largest -- has found itself in a difficult position as resources are drying up after decades of exploitation. The Daqing Oilfield, in the country's northeast, still accounts for 40 percent of the company's total output.

CNOOC, meanwhile, has recently struck a deal with the Inner Mongolia regional government on taking over the Tianye Chemical Group, whose assets are worth some 4 billion yuan (US$500 million).

There are also reports that CNOOC may be looking to get involved in the country's biggest natural gas field, which so far has been handled by PetroChina's Changqing Oilfield.

Sinopec, the country's biggest oil refining and petrochemicals company, is also submitting an application for offshore oil exploration and production in the South China, East China and Bohai seas, according to The Economic Observer.

The market is driving the three state-owned giants to diversify, but the central government touching them up with its own spurs. All three need to improve competitiveness and efficiency, increasing oil output to power the country's rapidly growing economy.

China has become a net oil importer in the past decade, buying 91.1 million tons of crude and 28.2 million tons of refined oil in 2003. Crude oil imports are forecast to exceed 100 million tons this year.

(Xinhua News Agency July 13, 2004)