China Puts Five Xinjiang Oil Fields on Auction Block

China will accelerate its efforts to open up upstream oil and gas resources by auctioning five more oil exploration sites in Xinjiang.

This will be the second auction of oil sites in the northwestern autonomous region open to privately-owned firms. In July 2015, the Chinese government auctioned off the rights to explore five parcels of land in Xinjiang. Prior to this, upstream oil and gas assets in the country were almost exclusively controlled by China’s largest state-owned energy companies.

The five new sites, located in Xinjiang’s Tarim basin, have a combined area of over 9,000 square kilometers (3,500 square miles), and will be opened to bidders through five-year exploration permits — longer than the three-year permits offered in 2015, the Ministry of Land and Resources said Tuesday.

The announcement comes after the central government issued a policy guideline in May calling for China to open up the exploration and exploitation of hydrocarbon resources to market entities.

But the new round of bidding will still be restricted to investors fulfilling certain criteria. They must be mainland-registered independent legal entities rather than consortiums, and they must agree to independently bear the costs and risks of production. Bidders are also required to have at least 1 billion yuan ($151 million) in net assets, the ministry said.

Remote Xinjiang is immensely rich in hydrocarbons. As of 2015, the region had an estimated 22.8 billion tons of oil reserves, and over 17.5 trillion cubic meters of natural gas. But most of China’s best domestic exploration sites are already concentrated in the hands of the big three oil companies — Sinopec, CNOOC, and Petrochina — an industry insider told Caixin.

Additionally, the person said, low global oil prices mean companies currently have a weak desire to invest.

Contact reporter Teng Jing Xuan (jingxuanteng@caixin.com)