SIM Report: Northeast Asia, Issue 4

CHINA: GOVERNMENT ALLOWS FOREIGN, DOMESTIC OIL AND GAS EXPLORATION
Beijing on 9 January announced it will allow foreign businesses to engage in oil and gas exploration in China. Foreign businesses officially registered as an entity in the country with net assets totalling RMB300 million (USD43m) and more will be allowed to secure oil and gas exploration rights. This is effective as of 1 May. Previously, foreign companies could only explore for and produce oil and gas in conjunction with Chinese businesses, including state-owned enterprises (SOEs). Mineral mining licences will be valid for five years, with extensions comprising of five-year periods. When companies put in an application for renewal of exploration rights, the area of exploration of their originally registered zone will be decreased by 25 per cent. This rule will oblige SOEs, which run most of the resource deposits, to cede a portion of their acreage. This is likely to encourage investors, as it means that the state’s monopoly in the sector can be broken up.
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