Xinjiang to become China’s top oil producer

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The National Development and Reform Commission (NDRC) announced that over the next three years, China’s two top energy giants China National Petroleum Corporation (CNPC) and Sinopec will spare no efforts to double output from the Xinjiang Uygur Autonomous Region to 44 million tons of oil, the People’s Daily reported.

“Oil production and petrochemical sectors have become Xinjiang’s pillar industries, with output form them contributing to more than 60 percent of the region’s total industrial output” Ismail Tilwaldi, chairman of the Xinjiang Uygur Autonomous Region said on March 9 at the fifth session of the 10th National People’s Congress.

This increase in estimated oil production for the region comes on the heals of an announcement last month buy the China Petroleum Pipeline Bureau (CPPLB) that they were planning on extending China’s oil and gas pipelines nearly 63 percent by 2010 as we posted on February 27. In order to develop its oil and gas industry, China has begun opening up the sector to foreign funded companies, using incentives to push industrial development in the western regions

According to analysts, the opening up of China’s crude oil and refined oil sectors to foreign funded companies has lead to increased competition in the sector, and local companies are turning to price cuts as an important and often used tool. The CNPC lowered petrol prices at 100 gas stations around Beijing on Friday, which could lead to a national price cut as some gas stations said they would follow suit.

China began to open the oil and gas sector to foreign investment at the beginning of the year but the pace of reform in the sector is likely to remain slow as energy is considered by Beijing to be a key sector that it will want to remain in control of for some time yet. FDI in the sector is going to be likely encouraged in the western regions where infrastructure and modern production facilities are in limited supply.