MOFCOM Approval on Sino-Foreign Petroleum Contracts
MOFCOM Approval for Sino-Foreign Cooperative Petroleum Contracts
in China No Longer Required
Last week on May 15, 2013, China's State Council published a
decision to further eliminate certain administrative examination
(the "Decision"). According to the Decision, certain
items (including projects, activities, organizations and other
similar matters) which previously required central government
approval now no longer require such approval.
What this means for foreign oil companies
("IOCs") is that approval from the
Ministry of Commerce ("MOFCOM") for
contracts such as petroleum agreements, production sharing
contracts, etc. ("Petroleum Contracts")
is no longer required. This has the potential of reducing the
number of days spent on future transactions by up to 40 days
(previously, this was the number of days needed to obtain MOFCOM
approval for such projects). Nevertheless, the requirement for
examination and approval of IOCs who bid for such contracts still
Currently, only certain IOCs are permitted to enter into
contracts with Chinese oil companies (such as CNPC, Sinopec, CNOOC
and CUCBM) for the purposes of developing onshore and offshore
petroleum and coal bed methane resources in China. Generally
speaking, all such development projects are put out for tender and
an IOC is usually required to submit a bid to enter into a
Petroleum Contract with the relevant Chinese oil company.
Before the Decision
An executed Petroleum Contract previously had to be approved by
MOFCOM. The approval process could take up to 40 days in total.
There is no longer a requirement to obtain MOFCOM approval for
Petroleum Contracts. Accordingly, once the Petroleum Contract is
negotiated and executed by the parties, it will not require any
further approval. However, an IOC must still be qualified to enter
into a Petroleum Contract with the relevant Chinese oil company for
the purposes of developing petroleum resources in China.
Practical Effects and Observations
Although the practical effects of the Decision remain to be
seen, the Decision theoretically may:
simplify the application process for IOCs that want to conduct
petroleum operations in China (particularly for those IOCs that
have already been qualified for this purpose);
reduce the overall transaction time by up to 40 days; and
add more certainty to the overall application process and
future petroleum transactions for IOCs.
The Decision is part of a series of amendments to the State
Council Decree No. 606 and No. 607 (2011)
to the Sino-foreign cooperative exploitation of onshore and
offshore petroleum resources. Since August 2012, a total of 502
items have been identified as no longer requiring central
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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