China’s government is offering private companies the rights to explore six oil-and-gas blocks in a small step toward opening the nation’s energy resources to private investment.

The Ministry of Land and Resources said Tuesday that the pilot program would offer access to onshore blocks in China’s far northwest Xinjiang region, which has ample reserves but where commercial extraction is difficult due to its remote location and complex geology.

One aim of the program, the ministry said in a statement, is to “stir up market vigor.” The ministry said potential bidders would be encouraged to cooperate with state-owned enterprises already active in the region, namely China National Petroleum Corp. and China Petroleum & Chemical Corp., known as Sinopec Group, which control most of the nation’s onshore oil-and-gas reserves.

Neil Beveridge, an analyst at Bernstein Research, said the test is “certainly a good thing, but probably not a game-changer.” He said much would depend on the quality of reserves at the blocks on offer.

The announcement marks a step forward for promised reforms of China’s state-dominated oil-and-gas sector. Those reforms have been slow-moving; so far they have included opening up the Sinopec unit that operates gas-station convenience stores to private investors. Questions remain about how far the government is willing to go in letting private companies into the sector and in challenging the dominance of China’s behemoth national oil companies.

Source: The Wall Street Journal