Scientifically improve the oil and gas resources management system, and stabilize the cornerstone of national energy security!

Oil and gas resources occupy a pivotal position in China's energy resource structure and have always been regarded as strategic mineral resources
to ensure national energy security.

The importance of energy resources and strategic mineral resources determines the importance of relevant management systems and the urgency
of reform.
The revision of China's Mineral Resources Law has undergone many rounds of research, is gradually accelerating its completion and has entered the legislative process, of which the reform of the oil and gas resources management system will also be implemented, and a series of important reform measures will be established through legislation to clarify the system, which will have a far-reaching impact on
the guarantee of national energy security.

The oil and gas resource management system should be closely designed around the main purpose of the reform of the oil and gas system

After years of efforts to promote the reform of China's oil and gas system, the "top-level design" was launched in 2017, and the CPC Central Committee and the State Council issued the Several Opinions on Deepening the Reform of the Oil and Gas System (hereinafter referred to as the "Opinions").

For the institutional design of oil and gas resource management reform, it is necessary to carefully grasp the main points of four aspects: First, the overall purpose and objectives
.
The "Opinions" pointed out that it is necessary to "establish and improve an oil and gas system with orderly competition, laws to follow, and effective supervision, so as to realize the organic unity of national interests, enterprise interests and social interests" and "ensure national energy security, promote the development of productive forces, and meet the needs of the people"
.
The second is the basic principle
.
The focus is to adhere to the market-oriented direction and adhere to the bottom line thinking
of ensuring national energy security.
The third is the idea
.
The focus is on "giving play to the decisive role of the market in the allocation of resources and giving better play to the role of the government", "releasing the market vitality of competitive links and the vitality of backbone oil and gas enterprises, and improving the ability to ensure the continuity of resources"
.
The fourth is the key tasks and expected goals
.
The main purpose is to "improve and orderly liberalize the oil and gas exploration and exploitation system" and "gradually form an exploration and exploitation system led by large state-owned oil and gas companies and jointly participated by various economic components"
.

At present, the design of the oil and gas mining rights withdrawal system has a large difference in views, and there is room for improvement

1.
The current trial rules and the revision trend of the Mining Law have a strong shock to the mining rights holders

At the end of 2019, the Ministry of Natural Resources issued the Opinions on Several Matters Concerning the Promotion of the Reform of Mineral Resources Management (Trial Implementation) (Natural Resources Regulation [2019] No.
7, hereinafter referred to as Circular 7), in which important reform measures such as adjusting the term of prospecting rights and stipulating the deduction of 25% of the area of the first certificate when they expire and renewal have been launched
.
In the 2020 and 2021 Mining Law Revision Drafts, a limit on the number of renewals is proposed, the main reference being "renewal does not exceed two times, each term is 5 years, and a certain scope of prospecting rights should be reduced"
.

The system of refunding prospecting rights has evolved from the original minimum exploration input system to the continuation of mandatory reductions (hereinafter referred to as "hard withdrawals") or even zero
.
This major change in the design of the system and the specific practice of the trial rules have aroused the current oil and gas mining rights holders to worry about the future development, especially in large state-owned oil enterprises, the continuous "hard withdrawal" and even the gradual clearance of existing prospecting rights, which will greatly reduce the actual exploration space and effective exploration time of enterprises, and may affect the enterprises to vigorously enhance exploration and development efforts and stabilize the foundation for
resource succession.

2.
Analysis of the main purpose of the reform of the regression system

The system of refunding prospecting rights is a basic system in the management of mineral resources, the main purpose is to urge mining rights holders to carry out the necessary exploration and development work in a timely manner after obtaining mining rights, to avoid "circle without exploration" or "long-term exploration without effectiveness", so that resources can be efficiently discovered and utilized, and play a greater role
in ensuring domestic supply and national security.

Before the implementation of Circular 7, the withdrawal of prospecting rights was mainly based on the minimum exploration input system, and if the holder of prospecting rights failed to perform the statutory minimum exploration input obligations, he needed to reduce the corresponding area
of prospecting rights according to the proportion of input.
Since the introduction of the system in 1998, although the detailed rules have been constantly changed during the period, the principle of "quitting if it is not done" has been grasped to avoid "circle without exploration"
.
In the past ten years, the national oil and gas mining rights area has dropped from more than 4.
5 million square kilometers at the peak to about 2.
9 million square kilometers, which should be said to be the withdrawal system with the main purpose of restricting "circle without exploration", and has also created conditions
for the liberalization of the upstream oil and gas market to introduce diversified market players 。 However, objectively speaking, the role of the minimum exploration input system in restraining the "long-term exploration ineffectiveness" of mining rights holders is relatively weak, especially in the case that the formulation and implementation rules of the minimum exploration input standard are difficult to fit the more complex situation of oil and gas exploration and development, and it is often difficult to play an effective binding role
for blocks that meet the minimum exploration investment for a long time but have no substantial exploration progress.
Therefore, Circular 7 introduced a "hard withdrawal" policy and tried it out first to prepare
for the inclusion of the new mining law in the formation system.

3.
There are three aspects of the design of the withdrawal system where the differences are relatively prominent, and further improvement should be considered

How to link a fallback to a discovery is appropriate
.
In the actual implementation of the "hard withdrawal", the area according to the first certificate is used as the base number for nuclear reduction, and the area that has been proved or even transferred to mining is still included in the nuclear reduction base, and is not "excluded", that is, regardless of the good or bad work of the prospecting rights holder, the reduction range remains unchanged
.
From the perspective of purposeful analysis, there is a deviation from the original intention of restricting the "long-term exploration of ineffectiveness", and more emphasis is placed on the accelerated recovery of prospecting rights, especially the intention to provide transfer of beneficial blocks for the recovery is more obvious
.
It is possible that the blocks that are "explored and discovered" must be returned to the market, and then the exploration and development can continue after the transfer, interrupting the scientific and reasonable rhythm of exploration and development, increasing the risk of sunk of the enterprise's investment, and may also affect its enthusiasm for vigorously improving the intensity of exploration and development and the actual exploration process
of the relevant fields or areas.
To this end, practical consideration should be given to the establishment of a system
for the withdrawal of prospecting rights with an effect of encouraging discovery.
The discovery can be made from the point and the surface, and the substantial newly discovered prospecting rights have been obtained, and the mining rights holder is bound to increase the exploration efforts to further expand the exploration results, and it is obviously more advantageous
to leave more exploration space in the prospecting rights to the mining rights holder than to require its reduction.
Therefore, for each holder of prospecting rights that have substantial exploration and new discoveries during the period of the license, the period of their corresponding prospecting rights should be reasonably extended, and the corresponding prospecting rights should not be reduced or reduced, so as to maintain the stability of their relevant exploration space and encourage them to make new contributions
to oil and gas exploration and development.

Do you want to set a limit
on the number of renewals at the same time? The revision of the Mineral Law proposes a design to limit the number of renewals, which is equivalent to setting an overall exploration period for prospecting rights holders, and as long as the prospecting rights expire and are not converted into mining rights, they will face repossession
.
In fact, there is a mutual echo and superimposed enhancement effect with the "hard withdrawal", and the comprehensive application is mainly to limit the total exploration period of the prospecting right holder
.
According to the hard refund of 25% of the area of the certificate first set in Circular No.
7, even if the number of renewals is not set, in theory, it will be renewed up to three times, and only 1/4 of the scope of prospecting rights can be licensed for a maximum of 20 years
.
If the renewal limit is set on the basis of the 25% hard withdrawal, it is actually 1/2 of the range for the longest 15 years
.
This superposition design has advantages and disadvantages, although it is possible to achieve a breakthrough through the "substitution" operation of exit and re-transfer, but there are also problems that affect the rhythm of exploration and planned deployment and increase investment risks, after all, when faced with a clear expectation of the withdrawal of prospecting rights, the relevant exploration deployment and investment will most likely be terminated or withdrawn
in advance.
Therefore, a reasonable mix of the reduction ratio and the number of renewals may be more important
.

How to take into account the release
of market vitality and backbone enterprise vitality.
Large state-owned oil and gas enterprises shoulder the economic, political and social responsibilities, the stable development of a domestic oil and gas field of high professional quality of professional force, long-term undertaking of domestic oil and gas supply and national energy security tasks, at least in the short and medium term role is irreplaceable, but if there is no basic guarantee of prospecting rights, there will be a lack of sufficient exploration space and loss of stable oil and gas resource base, not only the main responsibility is difficult to complete, but also to a certain extent affect the stability
of the overall team 。 After all, domestic oil and gas resources are limited, starting from China's national conditions and the special strategic position of prominent oil and gas resources, straightening out the relationship between stimulating market vitality and giving full play to the role of the main force of large state-owned oil enterprises, we can consider achieving it
through certain institutional arrangements.
For example, the establishment of national oil and gas support bases in key onshore basins and sea areas will support enterprises undertaking to ensure national energy security to hold the bottom line area
of existing prospecting rights that match the completion of national strategic planning goals for a long time。 Outside the scope of the base, a system
of withdrawal of prospecting rights with an effect of encouraging discovery will be fully implemented.

The design of the linkage system for oil and gas mining rights can be further strengthened

The management of prospecting rights is closely related and complementary, and for the managers of mining rights, it is a reconfiguration of exploration authority; For mining rights holders, it means the realignment of exploration space and resource base
.
"Entering", the current full implementation of competitive transfer, and mainly using the listing or auction based on the transfer method, "the highest price wins", so that the competition in the market for favorable blocks is extremely fierce
.
In 2021, Xinjiang will transfer 15,000 square kilometers of conventional oil and gas prospecting rights in three rounds, with a transaction amount of up to 3.
65 billion yuan, creating a single transaction price of more than 1 billion yuan and a transaction unit price of more than 1 million yuan per square kilometer; "withdrawal", the above "hard withdrawal" system will bring richer sources
to the transfer block.

It is true that the high transfer income has brought practical benefits to the government, but from another point of view, the high acquisition cost brings relatively large investment risks
to enterprises.
The generation of high transfer income is based on high return expectations, and high return expectations are based on regional exploration practices, real preliminary research and scientific research
.
The 2021 Xinjiang transfer block basically originates from the area designated and recommended by large state-owned oil and gas enterprises, which is proposed
by combining the successful experience of exploration in the existing mining rights area, investing in preliminary research, and re-understanding.
However, due to various reasons, it is difficult for central enterprises themselves to bid for the new prospecting rights they want at the appropriate price, and in the three rounds of transfer in Xinjiang, the highest transaction price and the highest transaction unit price are not central enterprises
.
Therefore, while the effective exploration space of central enterprises continues to shrink, they cannot get new effective supplements, which actually affects the full play
of the role of the main force.

In order to better guide diversified market entities to devote themselves to oil and gas exploration and development industry, share the reform dividend, straighten out the relationship between the advance and retreat of mineral rights, alleviate the problems caused by the rigid constraints of the exploration period, and ensure the maximization of the overall interests of the country, it is recommended that the design of the mining rights management system fully consider the establishment of a linkage mechanism
。 First of all, effectively enrich the transfer method, change the current listing or auction as the main "high bidder" relatively single transfer method, combined with the specific conditions and characteristics of the block, scientifically select different transfer methods, adjust the bidding standards, so that the newly transferred prospecting rights fall more into the hands of resource discoverers; Secondly, the formulation of incentive policies to encourage the research of new districts and the recommendation of new blocks, for the recommenders who invest in the preliminary evaluation research and set up new blocks, when the recommended blocks are successfully transferred, if they are not their own bidding, they are allowed to deduct the area that should be reduced with the recommended transaction area, which will help stimulate market vitality
.