PetroChina Said to Plan Energy Asset Sale in Restive Xinjiang

The parent of PetroChina Co. plans to sell oil and gas field stakes to local investors in the northwest province of Xinjiang as part of government efforts to bring growth and jobs to the restive region, said two company officials.

State-owned parent China National Petroleum Corp., the nation’s biggest oil and gas producer, is looking for partners with around 10 billion yuan ($1.6 billion) to invest in exploration and production ventures, the people said, asking not to be named as the plan isn’t public.

Beijing-based PetroChina owns most of its parent’s oil and gas fields in Xinjiang and will handle the offer of stakes in at least two large untapped oil and gas fields this year, the people said, declining to identify the fields or their size. Qu Guangxue, CNPC’s Beijing-based spokesman, did not answer two calls to his office seeking comment.

Partners would be limited to companies backed by the Xinjiang government or Xinjiang Production and Construction Corp., the people said. Any joint ventures would pay taxes to Xinjiang not the central government, they said. Xinjiang Production and Construction was a one-time military body that guarded Xinjiang’s borders in the 1950s and now oversees commodities output in parts of the province from cotton and fruit to coal and chemical products.

Xinjiang is the gateway for China’s natural gas imports from Central Asia. CNPC’s four west-to-east pipelines all run through the region, pumping fuel to markets in eastern and southern parts of China, such as Shanghai and Hong Kong.

Invest West

CNPC, whose operations make up one sixth of Xinjiang’s GDP, is following an initiative from the central government to boost the province’s economy. Xinjiang, which contains about a quarter of China’s onshore crude reserves and almost 30 percent of its natural gas, has been riven by deadly protests in recent years as ethnic groups sought independence.

PetroChina has reported proven crude oil reserves of 1.55 billion barrels in Xinjiang. That’s about a sixth of Angola’s, an OPEC member and the second largest oil producer in Africa.

At a conference in Xinjiang in May, CNPC general manager Liao Yongyuan said the company would invest 340 billion yuan in the province from 2014 to 2020, making it the company’s biggest oil and gas production base in China. In June, Chairman Zhou Jiping said CNPC would open up Xinjiang to investors.

‘National Call’

“CNPC is heeding to a national call in Xinjiang,” said Lin Boqiang, director of the Energy Economics Research Center at Xiamen University and an independent director of PetroChina.

Setting up joint ventures would help the company diversify its shareholding structure and boost earnings by unleashing untapped reserves, Lin said.

CNPC may also allow companies to independently operate its proven oil and gas fields in Xinjiang, the two people said. CNPC would charge a fee on every barrel of oil or cubic meter of gas they produced.

Later opening up the province’s resources could expand beyond Xinjiang government-backed companies to include private investors both domestic and foreign, the people said.

The Xinjiang Uyghur Autonomous Region is the largest area of its type in China and has borders with Russia, Pakistan and Afghanistan, among others. The region has a population of about 22 million in an area around four times the size of California.

Uighur Unrest

Han Chinese make up 41 percent of the population, while Uighurs, a Muslim people from eastern and central Asia, account for about 45 percent. Uighur demands for autonomy and protests against Chinese rule have led to deadly clashes.

As many as 96 local people were killed in Xinjiang in July alone, mostly by police, as celebrations to mark the end of Ramadan, when Muslims complete a month of fasting, led to clashes, according to China’s official Xinhua News Agency.

China has labeled Uighur separatists as “religious extremists and terrorists” and started a one-year crackdown campaign in May.

The Uyghur American Association in a July 29 statement condemned what it called “excessive state violence” against the local ethnic community and said the deaths in July amounted to “extrajudicial killings.”