The Catalogue of Industries for Guiding Foreign Investment (2015
Revisions) (NRDC & MOFCOM Order No. 22)
("2015 Catalogue"), issued by the
National Development & Reform Commission
("NDRC") and the Ministry of Commerce
("MOFCOM"), takes effect April 10, 2015,
and revises some investment categories affecting the oil & gas
sector. Among these revised categories are those affecting
investments involving enhanced oil recovery technology
("EOR"), as well as seismic companies,
drilling contractors and well service providers. In addition, other
changes appear to further clarify that investments into shale and
other unconventional oil & gas projects are governed by the
same rules and restrictions as those applying to conventional oil
& gas investments.
Generally speaking, the Catalogue provides guidance to foreign
investors with respect to China's view on investments in
different industries. The Catalogue does so, in part, by dividing
industries among four categories, namely "encouraged",
"restricted", "prohibited" and by implication,
"permitted". Each such category carries with it certain
rules or restrictions governing investors in such category. In
addition, the Catalogue often sets forth sector-specific rules or
restrictions that apply specifically to such sector within the
category. A commonly encountered restriction is one requiring
foreign investments be made only by way of a Sino-foreign joint
venture arrangement (whether equity or contractual joint
Lifting of JV restrictions on EOR, seismic, drilling and well
According to the 2011 version of the Catalogue (NDRC &
MOFCOM Order No. 12), investments involving enhanced oil recovery
technology, geophysical prospecting and well drilling and services
were designated as "encouraged" but were subject to the
restriction that such investments could only be made by way of
Sino-foreign joint ventures.
When the 2015 Catalogue takes effect, foreign investments
involving these sectors, more precisely: (i) technology for
development and application of enhanced oil recovery
and (ii) technology for development and application of geophysical
prospecting, drilling, well logging, mud logging, and down-hole
no longer require a Chinese partner. Thus, foreign investors in
these sectors may, if desired, invest by way of wholly
Consolidation of conventional and unconventional oil & gas
A second notable revision in the 2015 Catalogue affecting the
oil & gas sector regards unconventional oil & gas
The 2011 version of the Catalogue listed as separate sectors (i)
oil and gas (石油、天然气),
(ii) coal-bed methane (煤层气), (iii) low
permeability oil and gas reservoir (field)
(低渗透油气藏 (田)), (iv)
oil shale, oil sands, heavy oil, super heavy oil and other
unconventional oil resources
and (v) shale gas, deep water natural gas hydrate and other
unconventional natural gas
These separate sectors led to some concern over the implementation
of projects that overlapped such sectors.
The 2015 Catalogue helpfully does away with these distinctions,
deleting the latter four sectors and clarifying that the oil and
gas sector includes shale, oil sands, coal-bed methane, and other
unconventional oil and gas sources
Although other legislation exists that could give rise to the
application of different rules based on the nature of the oil &
gas reservoir, the 2015 Catalogue revisions are an important step
towards clarifying that, unless expressly provided otherwise, oil
and gas laws and regulations of general application in China, apply
regardless of the oil & gas source matrix and viscosity.
Such clarifications are helpful in avoiding issues that might
otherwise have arisen, for example, in fields with complex, unclear
or variable geology.
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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