Although MOFCOM approval is no longer required for a Sino-foreign petroleum contract(1), the State Council has decided that the Chinese party must still “report and deliver information about the signed petroleum contract” to MOFCOM.
The relevant State Council Decision(2), which was made on July 18, 2013 and became publicly available on July 26, 2013, amends the regulations(3) relating to the exploitation of onshore and offshore petroleum resources in China. The relevant amendments are set out in paragraphs (a) and (b) below.
These amendments follow the State Council’s decision(4) in May 2013 to remove the need for MOFCOM’s approval for petroleum contracts. For more information about this decision, please see our previous Client Alert(5) dated May 2013.
(a) Information to be provided to MOFCOM
As a result of the State Council Decision, after the relevant Chinese company (i.e., CNPC or Sinopec Group for onshore exploitation and CNOOC for offshore exploitation) enters into a petroleum contract with a foreign company, it must submit information about the contract to MOFCOM.
The requirements for submitting information about a petroleum contract have not yet been made publically available. It is not clear what type of information is to be provided to MOFCOM and within what timeframe. It is also uncertain whether a copy of the petroleum contract needs to be filed with MOFCOM.
(b) Chinese party can determine its foreign counterparty
The relevant Chinese oil and gas company now has an express right to determine which foreign company will be a party to the petroleum contract as set out in the revised regulations(6). Prior to the State Council Decision in July 2013, this right was not expressly set out in the regulations. Previously, the Chinese company could choose the foreign company with whom it wished to enter into a contract. However, MOFCOM’s approval was still needed to validate the contract, which gave MOFCOM ultimate discretion to decide which foreign company could enter into a petroleum contract.
1. A contract on Sino-foreign cooperative exploitation of (onshore / offshore) petroleum resources, for example, a production sharing contract.
2. “Decision on the Cancellation and Amendment of Certain Administrative Regulations (State Council Decree No.638)” (国务院关于废止和修改部分行政法规的决定 (国务院令第638号)) (“State Council Decision“).
3. Regulations on Sino-foreign Cooperative Exploitation of Offshore Petroleum Resources (“State Council Decree No. 607”) (中华人民共和国对外合作开采海洋石油资源条例) and the Regulations on Sino-foreign Cooperative Exploitation of Onshore Petroleum Resources (“State Council Decree No. 606”) (中华人民共和国对外合作开采陆上石油资源条例). Article 7 of the State Council Decree No. 607 and Article 8 of the State Council Decree No. 606 have been amended.
4. “The State Council Decision on Cancellation and Delegation of a batch of Projects subject to Administrative Approval and other items (Guo Fa (2013) No. 19)” (国务院关于取消和下放一批行政审批项目等事项的决定 (国发(2013)19号)).
5. Client Alert dated May 2013 entitled “MOFCOM Approval on Sino-Foreign Petroleum Contracts No Longer Required”.
6. The State Council Decree No. 606 and the State Council Decree No. 607.