China plans to allow foreign companies to take part in oil and gas exploration and production (E&P) in the country, as part of its plans to boost domestic energy supplies.

The Ministry of Natural Resources stated that foreign firms registered in China with net assets of no less than CNY300m ($43m) will be allowed to secure mining rights for oil and gas exploration and production, reported AFP.

The change, which is also applicable to domestic companies, is said to be effective from May this year.

China Natural Resources Deputy Minister Ling Yueming was quoted by the news agency as saying: “Opening to both domestic and foreign enterprises is a major reform measure.”

Earlier, foreign firms could only enter the industry through joint ventures or collaboration with Chinese firms, with major state-owned enterprises such as China National Petroleum Company (CNPC) and China Petrochemical Corp (Sinopec), among others.

The latest reform comes as China looks to open to more sectors to private firms. These sectors were dominated by state-owned companies in the past.

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Meanwhile, Hong Kong-listed oilfield service executive was quoted by Reuters as saying: “This is quite an ice-breaker. It will take time but it could bring about the long-desired competitive environment that has made the oil and gas industry so efficient in North America.”

The Chinese ministry also noted that permits for mineral resources mining will be valid for a period of five years, with an option to extend the permits for another five years as well.

The ministry stressed that firms applying for exploration rights renewal will lose 25% of their area under exploration.