supply security, the government should introduce
differentiated tax policies for unconventional,
deep-water, low and enhanced recovery of oil
and gas to encourage companies to invest in the
development of these resources.
The mechanism for sharing oil and gas tax
revenues and royalties between central and local
government should be adjusted. Due to decentralisation and the unreliability of local taxation,
funds for local oil and gas development are
limited. As China’s economy develops, local
governments are subject to increasingly strong
demands to support local economic growth and
raise people’s living standards with the tax revenues from oil resource development. It is
therefore suggested that the tax mechanism for
oil and gas revenues and royalties be reformed to
ensure that resource development benefits local
people. Environmental compensation mechanisms should be established to levy a carbon or
environment tax on resource development and
use to increase local revenues.
A risk exploration fund should be established
to develop strategic oil and gas fields. The government could use RMB 3–5 billion from oil tax
revenues to establish a risk fund, which could be
used for high-risk exploration led by the government. The government can engage oil companies to carry out initial exploration and drilling
in high-risk fields by commissioning their services. If recoverable resources are discovered the
field can be transferred through competitive
bidding, and the earnings added to the risk fund
to create a long-term mechanism.
Fiscal and taxation policies to support the
construction of gas storage facilities should be
developed. The delays in gas storage construction have become one of the major constraints to
China’s gas supply security. It is suggested that
in provinces that lack the capacity to fulfil gas
storage peak-shaving tasks, the government can
invest in gas storage construction in several
ways, such as by allocating funds from the central government budget. The VAT rate for gas
storage should be lower, and a tax refund could
be given for the first five years to support
early-stage construction of gas storage facilities.
(5) Standardise government administration
and create an effective oil and gas regulatory system
For the government to exercise its role in market
supervision, regulation and services to the full
and achieve the reform objectives for the oil and
gas sector, government functions should be
transformed and the methods of regulation
overhauled.
First, government administration should be
standardised. Government should intervene less
in the market and in business activities. Administration should focus on the development of
strategies, plans, policies and market rules and
the creation of a fair and impartial industry.
Second, plans for the oil and gas industry should
be developed in a scientific way. They should be
linked to economic and financial development,
land use, infrastructure construction, environmental protection, safety, transport and technological innovation. A plan development
mechanism should be established to make planning more scientific and authoritative. Plans
should have a dynamic adjustment mechanism,
and environmental impact assessments should be
improved in accordance with relevant laws.
Third, the development of industry standards
should be accelerated. Macro-management based
on planning, policies and standards should be
applied to the oil and gas sector. Fourth, government services should be optimised. Energy
information and geological data sharing platforms should be built. The government’s role of
driving technological innovation should be
emphasised.
An effective oil and gas regulatory system
should be created. China should: (i) separate
administration and regulation, and form independent, unified and specialised regulatory
authorities, and improve the regulatory system at
the national and provincial levels; (ii) consider
setting up an independent centralised energy
regulatory system within the National People’s
Congress to define regulatory responsibilities
(mainly economic regulation), improve social
regulation and ensure fair competition in natural
472
S. Yaodong and A. Gillespie
differentiated tax policies for unconventional,
deep-water, low and enhanced recovery of oil
and gas to encourage companies to invest in the
development of these resources.
The mechanism for sharing oil and gas tax
revenues and royalties between central and local
government should be adjusted. Due to decentralisation and the unreliability of local taxation,
funds for local oil and gas development are
limited. As China’s economy develops, local
governments are subject to increasingly strong
demands to support local economic growth and
raise people’s living standards with the tax revenues from oil resource development. It is
therefore suggested that the tax mechanism for
oil and gas revenues and royalties be reformed to
ensure that resource development benefits local
people. Environmental compensation mechanisms should be established to levy a carbon or
environment tax on resource development and
use to increase local revenues.
A risk exploration fund should be established
to develop strategic oil and gas fields. The government could use RMB 3–5 billion from oil tax
revenues to establish a risk fund, which could be
used for high-risk exploration led by the government. The government can engage oil companies to carry out initial exploration and drilling
in high-risk fields by commissioning their services. If recoverable resources are discovered the
field can be transferred through competitive
bidding, and the earnings added to the risk fund
to create a long-term mechanism.
Fiscal and taxation policies to support the
construction of gas storage facilities should be
developed. The delays in gas storage construction have become one of the major constraints to
China’s gas supply security. It is suggested that
in provinces that lack the capacity to fulfil gas
storage peak-shaving tasks, the government can
invest in gas storage construction in several
ways, such as by allocating funds from the central government budget. The VAT rate for gas
storage should be lower, and a tax refund could
be given for the first five years to support
early-stage construction of gas storage facilities.
(5) Standardise government administration
and create an effective oil and gas regulatory system
For the government to exercise its role in market
supervision, regulation and services to the full
and achieve the reform objectives for the oil and
gas sector, government functions should be
transformed and the methods of regulation
overhauled.
First, government administration should be
standardised. Government should intervene less
in the market and in business activities. Administration should focus on the development of
strategies, plans, policies and market rules and
the creation of a fair and impartial industry.
Second, plans for the oil and gas industry should
be developed in a scientific way. They should be
linked to economic and financial development,
land use, infrastructure construction, environmental protection, safety, transport and technological innovation. A plan development
mechanism should be established to make planning more scientific and authoritative. Plans
should have a dynamic adjustment mechanism,
and environmental impact assessments should be
improved in accordance with relevant laws.
Third, the development of industry standards
should be accelerated. Macro-management based
on planning, policies and standards should be
applied to the oil and gas sector. Fourth, government services should be optimised. Energy
information and geological data sharing platforms should be built. The government’s role of
driving technological innovation should be
emphasised.
An effective oil and gas regulatory system
should be created. China should: (i) separate
administration and regulation, and form independent, unified and specialised regulatory
authorities, and improve the regulatory system at
the national and provincial levels; (ii) consider
setting up an independent centralised energy
regulatory system within the National People’s
Congress to define regulatory responsibilities
(mainly economic regulation), improve social
regulation and ensure fair competition in natural
472
S. Yaodong and A. Gillespie