The Chinese oil market should be opened to foreign companies to give China better access to international supplies and improve the operations of Chinese firms, according to a new report.

 

The time has come for the government to clarify the roles it expects private and state-owned foreign oil firms to play in the Chinese market, says the report by the Development Research Center (DRC) of the State Council.

 

In particular, the conditions for market entry and exit and for partnership with Chinese national oil companies and other local operators need to be clearly defined, says the report.

 

All policy and regulatory conditions should be transparent and applied without discrimination, stresses the report, which was presented to a seminar with the theme "An Energy-Saving Society" held by the DRC.

 

An open market enabling foreign companies and investors to play a greater role in oil supply and domestic resource development could be a positive signal to the international community, making it easier for Chinese oil companies to engage in similar activities abroad.

 

Meanwhile, Chinese firms should plan to interact profitably with and learn from foreign companies for better integration in global and regional oil markets, the report continues.

 

All major players seem to welcome China's growing role in world oil and, to a lesser extent, gas markets. The investment of Chinese companies in the development and marketing of new reserves are perceived as a stabilizing factor in future markets.

 

However, more transparency would improve the business orientation of Chinese national oil companies and ease their entry in the global market where they could be world class players, says the report.

 

Energy is the world's biggest business dominated by its largest corporations.  Exxon-Mobil is the world's largest private oil corporation while Saudi Aramco is the world's largest state-owned oil company with reserves 20 times greater than Exxon, the report observes.

 

Close relations with such companies can improve an importing country's access to international oil supplies, and many industrialized countries have relied successfully on the international oil companies to secure their import needs.

 

The report offers no recommendation on whether the Chinese government should emulate this strategy, but it points out that international companies have a useful importing role, which they could play along with Chinese national oil companies.

 

The international oil companies could also provide access to state of the art technology and management practices across the whole range of oil and gas industry activities, the report stresses.

 

(Xinhua News Agency June 14, 2006)