Oil & Gas 2026 Comparisons

In accordance with the Constitution Law (effective 1 March 1982, most recently amended in 2018) and the Mineral Resources Law (effective 19 March 1986, most recently amended in 2024), all mineral resources within China, including hydrocarbons, are owned by the State, namely the whole people. The State Council exercises the ownership of mineral resources on behalf of the State.

China adopts a multi-department co-ordinated regulatory system governing hydrocarbon-related businesses.

The Ministry of Natural Resources (MNR)

MNR is responsible for the supervision and administration of the upstream exploration and exploitation of hydrocarbon resources, including issuing exploration licences, mining licences, reviewing and recording mineral resources reserves and registering the transfer of mining rights.

The National Development and Reform Commission (NDRC)

NDRC is responsible for:

• finalising and issuing oil and gas planning prepared by the NEA;
• approving major energy investment projects; and
• organising the formulation of regulations and policies on oil and gas-related pricing.

Furthermore, in conjunction with the Ministry of Commerce, the NDRC draws up and jointly promulgates the Special Administrative Measures for Foreign Investment Access (Negative List) (2024 Edition) (NDRC and Ministry of Commerce, effective 1 November 2024), which regulate the sectors in which foreign investors are restricted or prohibited from investing.

The National Energy Administration (NEA)

NEA is responsible for:

• organising and formulating industrial policies and related standards for oil, natural gas and other energy resources;
• preparing oil and natural gas planning; and
• approving, endorsing and reviewing energy fixed-asset investment projects.

The Ministry of Commerce (MOFCOM)

MOFCOM is responsible for:

• jointly promulgating with NDRC the Negative Lists;
• formulating management measures for import and export commodities;
• issuing import and export licences;
• formulating policies on foreign investment;
• approving the establishment and changes of foreign-invested enterprises according to law; and
• approving the articles of association for major foreign investment projects and major changes according to law.

The Ministry of Finance (MOF)

MOF is responsible for:

• formulating tax policies for oil and gas; and
• jointly determining the fee rates for mineral resources compensation fees with relevant departments of the State Council.

For environmental regulator(s), please see 5.1 Environmental Laws and Environmental Regulator(s).

China has three principal national oil companies, China National Petroleum Corporation (CNPC), China Petrochemical Corporation (SINOPEC) and China National Offshore Oil Corporation (CNOOC). CNPC and SINOPEC predominantly engage in onshore hydrocarbon exploration, production, refining and product distribution, whereas CNOOC’s core operations cover offshore oil and gas development, refining and sales business. In addition, China Oil & Gas Pipeline Network Corporation (PipeChina) is the state-owned entity responsible for the construction and operation of core midstream infrastructure including long-distance crude oil, natural gas and refined oil transmission pipelines, LNG terminals as well as gas storage facilities.

Mineral Resources Law 2024

The legal basis for oil and gas exploration and development is provided in the Mineral Resources Law and its implementing regulations. Such legalisation stipulates the basic principle that mineral resources, including oil and gas resources, are owned by the state and that the State Council exercises the ownership rights over mineral resources on behalf of the state. Except under special circumstances, exploration and mining of mineral resources must be applied for and approved separately with exploration rights and mining rights, and be registered accordingly.

Regulation on the Implementation of the Mineral Resources Law 2026 (State Council, effective 15 June 2026)

The Regulation on the Implementation of the Mineral Resources Law is the major regulation that standardises the exploration and mining phase of oil and gas. To explore for oil and gas resources, an exploration licence must be obtained. Exploration rights can be obtained by means of first-apply-first-approve, agreements, tendering and bidding, or auction or listing. To mine oil and gas resources, a mining licence must be obtained. Mineral rights can be obtained by means of first-apply-first-approve, agreements, tendering and bidding, or auction or listing.

Regulations on Exploitation of Onshore and Offshore Petroleum Resources in Co-Operation with Foreign Enterprises

The Regulation on Exploitation of Onshore Petroleum Resources in Co-Operation with Foreign Enterprises (State Council, Effective 30 January 1982, most recently amended in 2013) and the Regulation of the People’s Republic of China on Exploitation of Offshore Petroleum Resources in Co-Operation with Foreign Enterprises (State Council, effective 7 October 1993, most recently amended in 2013) are both significant administrative regulations governing foreign investors entering into agreements with Chinese national oil companies (NOCs) for the co-operative exploitation of oil and gas resources in China.

In addition to the above-mentioned laws and regulations, hydrocarbon activities in China must abide by relevant laws and regulations regarding, inter alia, project investment, environmental protection, work safety, land use, labour protection, tax and public health.

Investors who propose to explore and exploit oil and gas in China should apply for exploration rights and mining rights (collectively, mineral rights), as well as their corresponding registration.

Most foreign investors participate in the upstream exploration and development by entering into petroleum contracts with NOCs for co-operative exploration and development of oil and gas. CNPC and SINOPEC enjoy the exclusive right to co-operate with foreign investors in onshore petroleum exploration, development and production in the areas approved by the State Council for foreign co-operation. CNOOC enjoys the exclusive right to co-operate with foreign investors in offshore projects. Zhonglian Coalbed Methane Limited Liability Company, CNPC, SINOPEC, and Henan Coalbed Methane Development and Utilisation Co., Ltd. enjoy the exclusive right to co-operate with foreign investors in the coalbed methane sector. Under the Sino-foreign co-operation model, NOCs are generally the entities to apply for and obtain the mineral rights.

Commencing on 30 June 2019, China lifted the restriction that exploration and development in the oil and gas sector by foreign investors be limited to the form of either joint venture or co-operation with Chinese NOCs. Foreign investors are permitted to participate in the development of upstream oil and gas by setting up a wholly foreign-owned enterprise (WFOE) after obtaining corresponding mineral rights.

In 2012, the majority (97% or more) of oil and gas exploration rights and mining rights were concentrated in the hands of NOCs. In 2020, more than 95% of the registered oil and gas exploration and development blocks were controlled by NOCs. This means that most of the oil and gas blocks with development potential have already been acquired by NOCs, and the participation in China’s oil and gas sector by foreign investors is still dominated by the Sino-foreign co-operation model, although foreign investors are permitted to apply for the exploration or mining rights of oil and gas by setting a WFOE.

Statutory Requirements

The statutory requirements for a mineral rights-holder are that it is a company registered in China with a net asset of no less than CNY300 million. In practice, a WFOE meeting these requirements is explicitly permitted to participate in the tendering and bidding organised by the nature resource department.

Application for Obtaining an Exploration Licence and Mining Licence

Applications for exploration licences are normally required to submit the following materials to the nature resource department:

• an application form for registration and a drawing or map showing the mining block for the proposed exploration;
• a copy of the applicant’s business licence;
• a work plan for exploration, or a contract for exploration or supporting documents for commissioned exploration;
• an implementation plan for exploration and its annexes;
• proof of the source of funds for the exploration project;
• proof of payment of the proceeds from the granting of mineral rights or disposal with considerations; and
• other materials required by the nature resource department.

Applications for mining licences are normally required to submit the following materials to the nature resource department:

• an application form for registration and a drawing or map showing the mining block for the proposed exploration;
• a copy of the applicant’s business licence;
• proof of payment of the proceeds from the granting of mineral rights or disposal with considerations;
• an approved geological prospecting report;
• comments on the evaluation and results of the announcement of the geological environmental protection and land reclamation;
• plans for the development and utilisation of the mineral resources;
• the exploration licences; and
• other materials required by the nature resource department

Regarding oil and gas resources, the applicants may also apply for the mining licence for rolling exploration and development pursuant to relevant regulations.

The nature resource department will determine whether to grant or deny the application for a licence within 40 days following the receipt of the application and notify the applicants of the result. If the application is granted, the applicant will, within 30 days following the date of the receipt of the notification, pay royalties for the utilisation of the mineral rights and the proceeds from the granting of mineral rights in accordance with relevant laws and regulations, go through the registration formalities and receive the licence.

Petroleum Contract for Sino-Foreign Co-Operation

Foreign investors are mainly identified by NOCs through the process of tendering and bidding, as well as negotiation. It is suggested that foreign investors interested in participating in these Sino-foreign co-operation projects closely follow up on the information released by NOCs and set up good communications with them.

Mining Right Proceeds

Where exploration rights or mining rights are granted through competitive procedures such as bidding, auction and listing-for-sale, the transaction price determined via competitive procedures shall be paid upon the grant; after mine exploitation commences, annual mining right proceeds from the grant shall be levied on an annual basis at the royalty rate for a mineral rights grant, as agreed under the contract.

Total proceeds from mineral rights grant = Transaction price of exploration/mining right + Annual incremental proceeds from mining rights grant collected annually.

Annual incremental proceeds from mining rights grant = Annual sales revenue of mineral products × Royalty rate for mineral rights grant.

The royalty rate stands at 0.8 for onshore mineral rights of petroleum, natural gas, shale gas and natural gas hydrate, and 0.6 for offshore mineral rights.

Special Petroleum Proceeds

In 2006, China implemented special petroleum proceeds on crude oil. Currently, the threshold price for this levy stands at USD65 per barrel. The special petroleum proceeds are considered non-tax income and are collected by the Ministry of Finance.

Abandonment Fee

Pursuant to the Interim Provisions on the Administration of Abandonment and Disposal of Offshore Oil and Gas Production Facilities (NDRC, NEA, MOF, STA and SOA, effective 23 June 2010), investors in China’s offshore oil and gas fields shall bear the liabilities and obligations for the abandonment and disposal of such facilities in proportion to their respective investment shares, and accrue abandonment costs as special funds for environmental protection and ecological restoration.

Resource Tax

According to the Resource Tax Law (effective 1 September 2020), mineral rights-holders conducting the exploration and production of crude oil, natural gas, shale gas and natural gas hydrates are to pay resource tax at the rate of 6% on the sales amount. Under the Sino-foreign co-operation model, companies involved, such as NOCs and operators, are responsible for paying the resource tax if the petroleum contract was signed after 1 November 2011. If the petroleum contract was signed prior to 1 November 2011, relevant companies must continue to pay royalty instead of resource tax during the term of the contract.

Enterprise Income Tax

According to the Enterprise Income Tax Law (effective 16 March 2007, most recently amended in 2018), the applicable enterprise income tax rate is 25%.

VAT

The applicable VAT rate is 9% for the sale of gas and 13% for the sale of crude oil. Under the Sino-foreign co-operation model, pursuant to the PSC, the NOC and foreign operator are to pay VAT of 5% in kind without input VAT credit.

Environmental Protection Tax

If the company directly emits taxable pollutants to the environment in the process of mining oil and gas, it is to pay the environmental protection tax in accordance with the Environmental Protection Tax Law (effective 25 December 2016, most recently amended in 2025). The specific tax amount shall be determined depending on the type and quantity of the discharged pollutants.

China grants CNPC and SINOPEC the exclusive right to co-operate with foreign enterprises in petroleum exploration, development and production within the onshore areas approved by the State Council for foreign co-operation in onshore petroleum resource exploitation. Meanwhile, CNOOC is vested with the exclusive right to conduct petroleum exploration, development, production and sales in sea areas open for foreign co-operation.

There are no mandatory local content requirements in the upstream sector.

In accordance with the Regulation on the Implementation of the Mineral Resources Law, where oil and natural gas are discovered during the exploration, the exploration rights- holder may commence mining operations upon completion of oil (gas) testing, submission of an integrated exploration and mining plan to the original mineral rights granting authority, and completion of filing formalities with the competent energy authorities as required.

It shall be noted that the exploration rights-holder shall still apply to the original mineral rights granting authority for conversion of the exploration right into a mining right, complete mining right registration in accordance with the law and obtain a mining licence. The application, together with documents including the mining plan, shall be submitted to the aforesaid authority within the term of the exploration right. The original mineral rights granting authority shall render a decision on approval or disapproval within 15 working days upon acceptance of the application. Where approval is granted, a mining licence shall be issued; where the application is rejected, the applicant shall be notified in writing with reasons specified.

Exploration Period

As discussed in 2.2 Issuing Upstream Licences/Obtaining Hydrocarbon Rights, mineral rights are currently acquired mainly through public tender procedures. The term of an exploration right is five years and may be renewed upon expiry, with a maximum of three renewals, each for a five-year term. For oil, natural gas and other strategic mineral resources designated by the competent natural resources authority of the State Council, additional renewals may be approved based on actual conditions subject to consent from such competent authority.

Production Period

The term of a mining right shall be determined with reference to mineral reserves and mine construction scale, and shall not exceed 30 years at maximum. Specific measures governing the determination of mining right terms shall be formulated by the competent natural resources authority of the State Council. If exploitable mineral resources still exist within the registered mining area upon the expiry of a mining right, the mining right may be renewed.

Prior to the expiry of any mineral rights, the original mineral rights granting authority may withdraw the mineral rights in accordance with the law where necessary to safeguard national mineral resource security or other public interests; fair and reasonable compensation shall be granted in accordance with the law if a mineral right is withdrawn.

Minimum Work Commitments

The model petroleum contract for upstream Sino-foreign co-operation projects sets forth minimum work commitments obligations for a foreign contractor, which normally takes the role of operator of the contact area. A foreign contractor should carry out all required exploration and production operations, in particular, perform minimum work commitments, failing which, pay the equivalent amount of money to the Chinese partner pursuant to the petroleum contract.

Restoration Requirements

The mining rights-holder shall be responsible for ecological restoration within the mining area. The mining rights-holder shall carry out ecological restoration and pollution prevention and control work in a co-ordinated manner. Prior to mineral exploitation, the mining rights-holder shall formulate a mining area ecological restoration plan in compliance with applicable laws, regulations, provisions issued by the competent natural resources authority of the State Council and the mineral rights grant contract, and submit such plan together with the mining plan to the original mineral rights granting authority for approval.

In China, the transfer of upstream interests is mainly achieved through the transfer of mineral rights or, for foreign investors in co-operation with a NOC, the assignment of interests under petroleum contracts.

Conditions for Transfer of Mineral Rights

Pursuant to the provisions of the Mineral Resources Law and the Regulations on the Implementation of the Mineral Resources Law, mineral rights may be transferred in accordance with law. Mineral rights under any of the following circumstances shall not be transferred:

• obtained through agreement-based grants that have been held for less than five years;
• sealed up in accordance with law;
• with unclear ownership or outstanding ownership disputes;
• whose transfer is prohibited under the terms of the mineral rights grant contract; and
• other circumstances where transfer is prohibited as prescribed by the State.

Requirements for Transfer of Mineral Rights

The transferee of mineral rights shall meet the qualifications required of the transferee at the time of the grant of such rights, including technical capacity. The transferor and transferee shall enter into a written mineral rights transfer contract specifying the rights and obligations of both parties. The contract shall explicitly stipulate matters relating to the performance of ecological restoration obligations for the mining area. The term of the mineral rights after transfer shall be the remaining term of the original mineral rights.

Registration of Mineral Rights Transfer

The transfer of mineral rights shall be registered in accordance with law. A transfer of mineral rights shall not take legal effect if the registration formalities are not completed.

Governmental Right of First Refusal

Presently, laws and regulations do not expressly specify any government’s rights of first refusal in the context of mineral rights transfer.

Assignment of Interests Under Petroleum Contracts

In petroleum contracts to be entered into with NOC, it is typically stipulated that foreign investors may assign part or all of their rights or obligations, or both, under the contract to any of their affiliates with the prior consent of NOC. However, if they intend to transfer any rights or obligations within the scope of the contract to any third party, prior approval from the NOC must be obtained and, under equal conditions, the NOC has the right of first refusal to such transfer.

In terms of the transfer of rights through a change of control, laws and regulations do not explicitly stipulate whether government approval is required in such cases. On the basis of practical experience, it is generally understood that if the change of control does not result in a change in the legal entity or the legal representative of the rights-holder, there is no need to apply for approval from a relevant government authority or register the change. At the level of petroleum contracts, it may be stipulated that the foreign investor is to obtain prior approval from the NOC before effecting a change of control.

There are no legal or regulatory restrictions on production rates in China.

Permitted Forms of Private Investment in Midstream Operations

PipeChina’s monopoly over transportation pipelines

Prior to the establishment of PipeChina, transportation pipelines across China were controlled by three different NOCs. PipeChina acquired transportation pipeline assets held by CNPC, Sinopec and CNOOC through market-based transactions in 2019, thereby attaining actual control over transportation pipeline assets in China.

Encouragement of private capital to invest in and construct infrastructure such as oil and gas reserves and LNG terminals

Pursuant to the Measures for the Planning, Construction, Operation and Administration of Oil and Gas Infrastructure (NDRC, effective 1 January 2026), the state supports all types of social capital, and private capital in particular, to take equity stakes in oil and gas pipeline projects in compliance with market-oriented principles. Qualified social capital (especially private capital) that satisfies relevant requirements on qualifications, financing capacity and credit standing is encouraged to participate in the investment and construction of infrastructure including oil and gas reserve depots and liquefied natural gas (LNG) receiving terminals. Foreign investors may participate in the aforesaid projects via WFOE structures.

Permitted Forms of Private Investment in Downstream Operations

There are no investment restrictions imposed by the Chinese government on downstream oil and gas sectors including petrochemical plants and retail gas stations. Foreign investors may engage in the investment and construction of such projects by setting up WFOE by itself, or setting up joint venture entities with other investors.

There is no state monopoly in the downstream oil and gas sector in China.

Licensing Requirements

Oil and gas-related products (eg, natural gas and crude oil) are generally classified as hazardous chemicals. The state implements a licensing system for the production, transportation and sale of hazardous chemicals. Private investors engaged in the production, transportation and sale of hazardous chemicals must obtain a licence for the operation of hazardous chemicals.

Conditions

Private investors applying for hazardous chemical operation licences must be duly registered as enterprises in China, and meet basic conditions, such as:

• the business premises, facilities, buildings and structures must meet the requirements of relevant national standards and industry standards;
• the main person in charge and work safety management personnel must possess safety knowledge and management capabilities; and
• sound work safety rules, regulations and operating procedures must be in place.

Accordingly, foreign investors may not obtain hazardous chemical operation licences, and are therefore prohibited from directly transporting or selling refined oil and natural gas in domestic markets, unless they have lawfully established enterprises within China and satisfied all the foregoing criteria and qualification requirements.

Pipeline Transportation

For pipeline transportation services, shippers generally enter into contracts with oil and gas infrastructure operators, such as PipeChina. Core contractual terms cover contracted natural gas throughput, scheduling regimes, pipeline balancing mechanisms, metering and custody transfer, quality control, as well as take-or-pay arrangements.

As for natural gas pipeline tariffs, cross-provincial pipeline transportation prices are set by the NDRC, while intra-provincial pipeline tariffs are determined by the development and reform commissions of respective provinces.

Storage

Large-scale gas storage facilities in China are owned by PipeChina and three other NOCs. Users may sign gas storage service agreements with the aforesaid entities to access such facilities. Storage fees are normally determined via auctions held at the Shanghai Oil and Gas Trading Centre and Chongqing Oil and Gas Trading Centre.

Retail Market

At present, private capital including foreign investment is permitted to invest in, construct or acquire petrol stations within China, and conduct oil and gas retail operations upon compliance with relevant legal requirements.

The tax regime for midstream and downstream operations follows the general framework set out in 2.4 Income or Profits Tax Regime: Upstream.

The tax regime for midstream and downstream operations follows the general framework set out in 2.4 Income or Profits Tax Regime: Upstream.

There are no mandatory local content requirements in the midstream/downstream sector.

Current Model of Midstream/Downstream Licence

For midstream and downstream operations, entities are required to obtain a Hazardous Chemical Operation Licence. Detailed application procedures and requirements for such licence are set out in 3.3 Issuing Midstream/Downstream Licences.

Domestic Supply Requirements

In accordance with the requirements of the Energy Law (effective 1 January 2025), enterprises undertaking gas supply services shall guarantee safe, continuous and reliable energy supply to energy users within their business coverage in compliance with applicable laws, regulations and relevant national provisions.

Without statutory or agreed causes, such enterprises are prohibited from refusing or interrupting energy supply services. They are also forbidden from arbitrarily raising supply prices, charging fees in violation of laws, cutting supply volumes or imposing purchase volume restrictions on end users.

Termination and Abandonment for Oil and Gas Infrastructure

If oil and gas infrastructure is to cease operation, be mothballed or decommissioned, operators shall dispose of such facilities in compliance with relevant national provisions. Throughout the whole process, operators must satisfy ecological and environmental management standards, adopt necessary safety protection measures, and file records with energy authorities at or above the county level as well as other relevant regulatory departments in accordance with laws and regulations.

Where permanent shutdown of oil and gas infrastructure is required, the pipeline operator shall notify relevant facility users one year in advance and reach a consensus through negotiation. If service demand still exists, both parties shall jointly implement safe, feasible and economically reasonable alternative solutions to ensure the stable operation of the oil and gas production, supply, storage and marketing system. Any disputes arising therefrom may be mediated by energy authorities at or above the provincial level.       

The principal mechanism for obtaining land use rights for oil and gas-related facilities is through state-owned construction land. Where the proposed site involves rural collectively owned agricultural land, the land must first be expropriated by the government and converted to state-owned construction land, following which land use rights may be granted to the investor through tender, auction or listing. Local governments determine compensation standards for expropriated agricultural land and reserve prices for state-owned construction land use rights based on market conditions.

Secondary transfers of state-owned construction land use rights are also permitted, allowing investors to acquire land use rights directly from existing rights-holders, subject to applicable prerequisites and regulatory requirements.

Compensation for compulsory acquisition of agricultural land is determined under the Land Administration Law based on composite land prices for districts formulated by provincial governments, taking into account original land use, resource conditions, output value and locational factors, and reviewed at least every three years. Compensation for above-ground attachments and standing crops is paid to their respective owners under the Regulations on the Implementation of the Land Administration Law.

Governmental Regulating Body

NEA serves as the primary state authority responsible for regulating hydrocarbon transportation activities in China.

Governing Laws and Regulations

The core legal and regulatory framework governing hydrocarbon transportation consists of three key instruments:

• The Energy Law;
• The Measures for the Supervision of Fair Access to Oil and Gas Pipeline Network Facilities (NDRC, effective 1 November 2025); and
• The Measures for the Planning, Construction, Operation and Administration of Oil and Gas Infrastructure.

These rules lay down mandatory fair and non-discriminatory third-party access obligations for pipeline operators and set out standardised requirements covering pipeline construction, operation, transportation service terms and relevant penalties for non-compliance, which directly control infrastructure access conditions and transportation tariff mechanisms.

Statutory Open Access Right for Third Parties

Both the Energy Law and the Measures for the Planning, Construction, Operation and Administration of Oil and Gas Infrastructure establish a mandatory open access regime. Operators of oil and gas pipeline networks are required to provide fair and non-discriminatory transportation services to all eligible market participants. The two regulations also specify administrative penalties for failure to provide equitable open access: violators may be subject to fines of up to twice the economic losses sustained by the affected parties. This open access obligation covers state-owned trunk pipeline assets as well as privately built oil and gas transportation infrastructure. No infrastructure operator may refuse qualified third-party users without legitimate grounds.

Key Regulatory Requirements regarding Terms of Service

In accordance with the above Measures, pipeline users must submit accurate and timely demand plans (including annual, monthly and daily nomination schedules) to pipeline operators as required by laws, regulations and signed service contracts.

Mandatory Unbundling Rules

The regulatory framework enforces strict functional unbundling to safeguard neutral third-party access.

Entities responsible for constructing and operating national trunk oil and gas pipelines, together with their affiliates, are prohibited from engaging in competitive upstream and downstream businesses such as oil and gas exploration and production, import and export, and product wholesale and retail (excluding self-consumption purchases and base stock). Except for emergency maintenance and repair services that are strictly necessary, such pipeline operators are also barred from auxiliary businesses including pipeline equipment manufacturing and construction works (excluding designated national key scientific research tasks).

Conversely, companies engaged in competitive segments (exploration, production, import, export and sales) and their subsidiaries are forbidden to invest in or operate national trunk pipelines, excluding project survey, design and construction activities.

Provincial governments shall separate pipeline transportation business from sales business within their jurisdictions. Pipeline transportation divisions must maintain independent financial accounting; full ownership separation will be implemented once market conditions permit.

Restrictions on Cross-Segment Operation by a Single Entity

As outlined in the unbundling provisions above, the law imposes clear prohibitions on integrated operation across multiple market segments by the same corporate group. Pipeline trunk operators are segregated from competitive upstream and downstream trading activities, while oil and gas sales/exploration entities are blocked from trunk pipeline operation, eliminating conflicts of interest that could distort fair third-party access to infrastructure.

Oil and gas products are classified as hazardous chemicals in China. Any entity engaged in domestic sales of such products must obtain a Hazardous Chemical Operation Licence, which constitutes the primary statutory sales restriction.

There are no national ownership ratio restrictions imposed on entities conducting retail sales of oil and gas products. Foreign investors are permitted to carry out oil and gas retail operations by establishing WFOEs.

No additional province-level rules mandate mandatory intermediaries, nor do they prohibit concurrent ownership of other segments of the oil and gas value chain for domestic product sales activities.

Restrictions on Exports of Oil and LNG

The state may impose restrictions or prohibitions on the exports of certain goods. According to the Announcement on Issuing the Catalogue of Goods Subject to Export Licence Administration (2026) (Catalogue 2026), 43 types of goods are subject to export licence administration in 2026, including crude oil, refined oil and LNG.

Parties engaged in foreign trade operations exporting goods listed in Catalogue 2026 must apply for an export licence. The export licence is to be presented to the customs for clearance procedures.

During the construction phase, a transfer of assets in an oil and gas project that has obtained government approval or filing under the Regulations on the Approval and Filing Management of Enterprise Investment Projects (State Council, effective 1 February 2017) will result in a change of investor. For approval-based projects, the transferor must apply to the competent development and reform commission to amend the original approval, or the transferee must obtain a fresh approval. For filing-based projects, prior notice must be given to the competent development and reform commission, or the transferee must complete a fresh filing.

During the operational phase, under the Administrative Measures on Operating Permits for Hazardous Chemicals (State Administration of Work Safety, effective 8 October 2002, most recently amended in 2015), the transferor must apply to amend its licence within the prescribed period following completion of the transfer, and the transferee must apply for a new licence.

China encourages foreign investment and protects the lawful rights and interests of foreign investors. The Foreign Investment Law establishes the foundational framework for foreign investment, confirming the pre-establishment national treatment plus negative list management system.

China imposes no market access restrictions on foreign investment in the hydrocarbon industry. The Catalogue of Industries Encouraged for Foreign Investment (2025 Edition) (NDRC and Ministry of Commerce, effective 1 February 2026) identifies exploration and development of petroleum and natural gas (including shale gas and coalbed methane), and utilisation of mine gas as priority areas for foreign investment.

The principal steps for establishing a foreign-invested enterprise in China are as follows.

Negative List Compliance Review

The proposed business activities must first be assessed against the foreign investment negative list. Restricted or prohibited activities will result in refusal of subsequent applications.

Pre-Approval of Sector-Specific Licences (If Required)

Where the proposed activities require an industry-specific licence, approval must be obtained from the competent authority prior to registration.

Market Entity Registration

The investor submits the requisite documents to the Administration for Market Regulation to obtain a business licence.

Post-Registration Filings with Relevant Authorities

This includes submission of the foreign investment information report (commerce department); engraving of the official seal (public security department); tax registration and invoice application (tax department); social insurance registration (social security department); registration as an import and export goods consignee and consignor through the China International Trade Single Window, where applicable (customs); foreign exchange registration with the Foreign Exchange Administration; and account opening at a bank.

Foreign investors are generally able to enter China’s hydrocarbon industry on a pre-establishment national treatment basis, subject to compliance with the Anti-Monopoly Law (effective 1 August 2008, most recently amended in 2022) and the Security Review Measures for Foreign Investment (NDRC and Ministry of Commerce, effective 18 January 2021).

Foreign-invested enterprises benefit from protections under the Foreign Investment Law. Article 5 confirms that the state protects foreign investors’ investments, returns and other legitimate rights and interests. Article 20 provides that expropriation may only occur in exceptional circumstances of public interest, must follow legal procedures, and must be accompanied by timely and fair compensation. Article 21 further guarantees foreign investors the right to freely remit into and out of China their contributions, profits, capital gains, asset disposal proceeds and other returns, in either Chinese Yuan foreign currency.

Pursuant to the Anti-Foreign Sanctions Law (effective 10 January 2021) and Counter-Sanctions List and Measures issued by the Ministry of Foreign Affairs, no organisations or individuals within the territory of China may engage in any transactions, co-operation or other related activities with persons and entities listed on the Counter-Sanctions List and Measures.

Principal Environmental Laws

The Ecological Environmental Code (effective 15 August 2026) shall come into force on 15 August 2026. This Code systematically integrates the existing legal systems governing ecological environment in China and will serve as the fundamental law for environmental protection upon its entry into force.

Environmental Regulator(s)

• The Ministry of Ecology and Environment (MEE) – MEE and local ecology and environment management departments are responsible for issuing approvals for Environmental Impact Assessments.
• The Ministry of Emergency Management (MEM) – MEM and local emergency management departments are responsible for issuing licences for hazardous chemicals business operation and work safety licences.

All projects, including hydrocarbon projects, must conduct an environmental impact assessment. Projects are classified into three tiers according to their likely environmental impact: those likely to cause significant environmental impact must prepare a full Environmental Impact Assessment Report; those likely to cause moderate impact must complete an Environmental Impact Assessment Form; and those with minimal impact need only complete an Environmental Impact Assessment Registration Form.

For projects likely to cause significant environmental impact and required to prepare a full Environmental Impact Assessment Report, public participation is mandatory: prior to submission, the building unit must solicit opinions from relevant organisations, experts and the public through public hearings or other appropriate means, and must attach to the submitted report a written explanation of whether and how such opinions have been adopted.

Projects requiring a full Report or Form must obtain formal approval from the competent ecological environment authority before construction commences. Projects requiring only a Registration Form need only complete a filing. The competent authority must issue its decision within 60 days of receiving a complete Report, or within 30 days of receiving a complete Form. Approving authorities have direct power to issue binding decisions.

The EHS framework governing offshore oil and gas development in China is primarily specified in the Ecological Environmental Code, with targeted provisions covering operational controls, discharge standards, emergency management and site protection, as detailed below.

Risk-Aligned Emergency Plan Filing

Operators engaged in offshore oil and gas exploration and development are required to formulate site-specific oil and gas pollution emergency response plans based on operational risk identification, and submit the plans for filing with the regional maritime offices of the Ministry of Ecology and Environment. This requirement is inherently risk-based, mandating that operators assess spill and pollution hazards and establish corresponding response procedures.

Discharge Compliance Verification

All discharges from offshore installations, including oily wastewater, drilling muds, drill cuttings and solid waste, must satisfy national environmental standards. Operators are required to maintain complete operational and monitoring records for regulatory inspection.

Material and Site Protection Rules

Materials used for offshore development must not contain radioactive substances exceeding statutory limits, or readily leachable toxic and harmful substances. Operations may not cause erosion, siltation or damage to territorial sea base points and their surrounding environment, nor endanger the stability of territorial sea base points.

Oil Spill Prevention Duty

Effective preventive measures must be implemented throughout the entire process of offshore oil and gas exploration, development and oil transportation to avoid oil spill accidents.

Offshore Oil and Gas Production

Laws and regulations mainly regulate the abandonment of infrastructure for offshore oil and gas production operations. The laws and regulations involved mainly include Interim Provisions on Administration over the Abandonment and Disposal of Offshore Oil and Gas Production Facilities, Interim Measures on the Management of Abandoned Offshore Oil Platforms and Environmental Technical Requirements for Disposal of Offshore Oil and Gas Production Facilities (Draft for Comment).

According to the above laws and regulations, as per the decommissioning requirements for operators of offshore oil and gas facilities, operators must:

• prepare development and decommissioning plans before offshore oil and gas field development, with an option to revise the decommissioning plan three years into production;
• apply in writing for decommissioning at least 90 business days before ending production, and they can only proceed after receiving regulatory approval;
• create a disposal plan for offshore oil and gas facilities and file it with the national energy authority before disposal; and
• start decommissioning within one year of production cessation unless there are valid reasons or new purposes.

Furthermore, the Interim Provisions on Administration over the Abandonment and Disposal of Offshore Oil and Gas Production Facilities specifically outline the dedicated provisions regarding decommissioning fees that offshore oilfield investors are required to pay as part of their responsibility and obligations for the disposal of production facilities.

According to these Interim Provisions:

• investors in offshore oil and gas fields share decommissioning costs based on their investments, and these costs fund environmental protection and ecological restoration;
• investors in Sino-foreign co-operative offshore oil and gas fields deposit monthly decommissioning fees in designated banks, and the interest generated contributes to the decommissioning fund chosen by investors; and
• the decommissioning fee account is managed under the oil and gas field account and supervised by the joint management committee and regulatory authorities.

Onshore Oil and Gas Production

Pursuant to the Regulations on the Implementation of the Mineral Resources Law, the mineral right holder shall be responsible for ecological restoration within the mining area. See 2.8 Other Key Terms: Upstream for relevant provisions.

Two core legislative instruments form China’s legal framework for climate change governance.

Energy Law

As the foundational overarching law for China’s energy sector, the Energy Law codifies green and low-carbon energy transition as a statutory national objective and establishes supporting policy mechanisms. It creates a green energy consumption promotion system backed by instruments such as the Renewable Energy Green Electricity Certificate (GEC) scheme, to encourage energy consumers to prioritise renewable energy and other clean, low-carbon energy sources. The Law also explicitly requires public institutions to give priority to procuring and using renewable energy, clean low-carbon energy, and energy-efficient products and services.

Ecological Environmental Code

This comprehensive codified legislation devotes a dedicated chapter to climate change response, covering climate change mitigation, carbon peaking and carbon neutrality goals, climate adaptation and international climate co-operation. It mandates the establishment and improvement of a national carbon emission statistical accounting system and the national carbon emissions trading scheme (ETS). Key greenhouse gas emission entities covered by the national ETS are legally required to fulfil mandatory emission reduction obligations in accordance with national regulations.

Local governments in China are permitted to impose restrictions on oil and gas development within their statutory authority, primarily for environmental protection, work safety and public interest purposes. However, their powers are strictly bounded by national legislation. Local authorities are prohibited from unlawfully restricting legitimate, duly approved oil and gas operations or compromising national energy supply security. During oil and gas development operations, should an enterprise commit violations such as unlawful discharge or ecological damage, local environmental authorities are empowered by law to order the suspension of operations for rectification, restrict production or impose fines.

National Policy

As early as September 2020, China’s leadership made a momentous announcement at the United Nations General Assembly. The commitment was clear: China endeavours to attain its carbon dioxide emissions peak before 2030 and is dedicated to achieving carbon neutrality by 2060. These dual carbon goals have since emerged as China’s fundamental targets in its proactive stance against climate change and in its pursuit of a trajectory aligned with green, low-carbon growth.

Energy Law

The cornerstone legislation governing China’s energy transition is the Energy Law, which entered into force on 1 January 2025, as the fundamental and overarching law for the national energy sector. It codifies China’s dual carbon goal into binding statutory rules. While safeguarding hydrocarbon energy supply security, the law’s overarching orientation of non-hydrocarbon energy substitution creates sustained structural incentives for traditional energy enterprises. Incumbent oil and gas players are pushed to diversify into renewable energy, CCUS and decarbonisation services, accelerating their evolution from pure fossil fuel producers to integrated energy service providers.

Key Decarbonisation Projects in the Hydrocarbon Industry

Among the ongoing trend towards green and low-carbon transition, China’s major oil companies are actively propelling the development of renewable energy projects.

On 28 March 2025, China’s first offshore CCUS injection well officially spudded at the Enping 15-1 Platform in the Pearl River Mouth Basin. The project is expected to inject more than one million tons of carbon dioxide into subsea formations over the next decade. While achieving geological sequestration, it will boost crude oil recovery factor through oil displacement.

The million-ton-scale integrated new energy, plus coal-fired power, plus CCUS project of CNPC Xinjiang Oilfield is China’s first full-industry-chain project integrating new energy, coal-fired power and CCUS. Its carbon dioxide injection volume exceeded 1 million tons in 2025 alone.

These significant initiatives reflect the latest strides in the traditional oil and gas industry’s transition towards a greener and more low-carbon future.

China’s Carbon Market

China’s carbon market has two core components: a mandatory national cap-and-trade ETS and a voluntary CCER credit market. The National ETS went live in July 2021, covering power, steel, cement and aluminium sectors with benchmark-based free carbon allowances and a 5& limit on CCER offsets for compliance. The revived CCER market generates tradable carbon reduction credits from green and decarbonisation projects. This dual market framework sets nationwide carbon pricing to drive industrial low-carbon upgrades and help realise China’s 2030 carbon peak and 2060 carbon neutrality goals, with plans to add oil and gas industries to the ETS coverage in coming years.

Upstream Exploration and Production

Upstream operators are encouraged to integrate decarbonisation into full-lifecycle field development: phasing out routine flaring, recovering associated gas, deploying methane control measures and scaling up CCUS demonstration projects at major oilfields.

Midstream Infrastructure

The midstream sector is evolving from dedicated fossil fuel transport into a multi-energy delivery system, midstream operators are actively piloting hydrogen blending in natural gas pipelines, retrofitting LNG terminals for cold energy recovery and on-site renewable generation, and repurposing selected pipeline corridors for low-carbon fuel transport.

Downstream Refining and Marketing

China’s refining industry is executing a nationwide “reduce refined oil output, expand high-value chemical production” strategy. Obsolete refining capacity is being phased out, while remaining capacity is upgraded to produce advanced chemical materials and low-carbon fuels such as sustainable aviation fuel (SAF) and biofuels, as domestic gasoline and diesel demand enters a peak plateau.

Traditional retail fuel stations are being upgraded into integrated energy service hubs combining petrol/diesel supply with EV charging, battery swapping, hydrogen refuelling and distributed solar services. Leading downstream players are expanding into integrated energy management to diversify revenue away from fossil fuel sales.

In accordance with the Circular on Matters Concerning Further Expanding Foreign Cooperation in Coalbed Methane Exploitation (Ministry of Commerce, NDRC and MNR, effective 17 October 2007) and other relevant provisions, the State permits China United Coalbed Methane Co., Ltd., CNPC, SINOPEC and Henan Coalbed Methane Development and Utilisation Co., Ltd. to co-operate with foreign enterprises in the exploitation of coalbed methane resources within areas approved by the State Council. Pursuant to the Catalogue of Industries Encouraged for Foreign Investment (2025 Edition), the exploration and development of shale gas and coalbed methane as well as the utilisation of mine gas fall under categories of projects encouraged for foreign investment.

China is an LNG importing country. Domestically produced natural gas is predominantly marketed via pipeline transportation. LNG exported from China is essentially re-exported cargo originating from imported LNG.

Encouragement for Foreign Investors to Invest in China’s Oil and Gas Industry

As set forth in 2.1 Forms of Private Investment: Upstream and 7.1 Unconventional Interests: Upstream, foreign investors are currently permitted to engage in the exploration and mining of hydrocarbon resources by establishing WFOEs within China. The NDRC encourages foreign investors to invest in China’s hydrocarbon sector.

Third-Party Access to Oil and Gas Infrastructure

Pursuant to the Energy Law and other relevant regulations, operators of oil and gas pipeline network facilities shall provide eligible users with fair and non-discriminatory services including oil and gas transportation, storage and gasification. Eligible users may submit applications to pipeline network operators for the right to utilise such oil and gas infrastructure.

Green Transition

The NEA encourages hydrocarbon operators to expedite their green, low-carbon, digital and intelligent transformation and pursue deep integration of fossil fuels with renewables, thereby driving oil and gas fields to evolve from conventional energy producers into fully integrated energy suppliers and end-to-end carbon mitigation service providers.

Energy Law

The Energy Law statutorily defines the development orientation of the hydrocarbon industry, namely that the State shall adopt a variety of measures to intensify the exploration and development of petroleum and natural gas resources and boost the domestic supply security capacity of petroleum and natural gas. The development of petroleum and natural gas shall attach equal importance to onshore and offshore exploitation. Large-scale development of unconventional oil and gas resources including tight oil and gas, shale oil, shale gas and coalbed methane shall be encouraged.