China

Investment & Operational Criteria

Key Indicators

Risk Premia

6.875

%

Outlook

Neutral

Rating

BBB|2S|±

Ranking

30

Reserves (1P)

Total

mm boe

Oil

40

%

Summary

While the PSC regime is generally adhered to, there has been concern in the past over the variability of the application of legal principals. However, we believe that the general operating environment is improving, hence our Outlook Positive.

Updated

June 9, 2021

Country Basics

Region

Asia - South East

Reserves (1P)

Oil

mm bbl

Gas

bcf

Location

ChinaChina

Eastern Asia, bordering the East China Sea, Korea Bay, Yellow Sea, and South China Sea, between North Korea and Vietnam.

Outline

Tax Regime
Type

PSC/PSA

Tax Regime
Notes

Complex Production Sharing Contract ("PSC")-based fiscal regime. State companies have the right to take up to 53% working interest in any commercial development, carried through exploration phase with no reimbursement for exploration expenses. Under certain onshore contracts, the contractor is solely responsible for all pilot phase and production phase development costs.

Investment & 
Operational
Climate

While China has started to open up its economy in some areas, there are restrictions on the extent to which foreign companies can operate in large areas of the economy. Personal relationship networks can exercise significant influence. There is a widely held perception that local companies may also enjoy greater political protection, including from local courts. While Chinese pronouncements of greater market access and fair treatment of foreign investment are welcome, details and effective implementation are needed to improve the investment environment and restore investors’ confidence.  As China’s economic growth continues to slow, officially declining to 6.1% in 2019 – the slowest growth rate in nearly three decades – China needs to deepen its economic reforms and implementation.  Moreover, the emergence of the Coronavirus (COVID-19) pandemic in Wuhan, China in December 2019, will place further strain on China’s economic growth and global supply chains.

Source: ESRI, Heritage Index, HMG Foreign & Commonwealth Office, US Department of State, International Trade Administration, International Law Review, Ernst & Young, Wood Makenzie & OGA data.

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