Nod for China-Taiwan Oil Search

BEIJING: The governments of China and Taiwan, political foes for half a century, agreed to allow their oil companies to jointly search for oil in the waters that separate them in an effort to curb mounting oil import bills.

Beijing and Taipei agreed to a proposal by Chinese Petroleum Corp, Taiwan's state oil company, and Beijing-controlled China National Offshore Oil Corp to look for oil reserves in the Tainan Basin, which spans Taiwanese and Chinese waters.

'We have received the government support we need to start work,' said Yang Chunbao, a China Offshore official. China Offshore is the parent of Hong Kong-listed CNOOC Ltd.

China and Taiwan are increasingly dependent on overseas producers for their crude oil. Taiwan imports nearly all the oil it uses, while China's imports are expected to rise to half its needs by 2020, from about 30 per cent now. Last year, the two spent a combined US$19.61 billion buying oil abroad.

'We can, from this month, officially start to carry out the contract,' said Liao Tsang-long, Chinese Petroleum's spokesman.

Ties between Taiwan and China, which considers the island a renegade province, have been bolstered by other shared economic interests. Taiwanese notebook computer makers such as Quanta Computer Inc are expanding production in China, where wages are lower, to drive costs down.

'Rules for investing in the mainland will gradually be relaxed,' said Richard Kao, who helps manage the NT$3 billion (S$150 million) of assets at ABN Amro Asset Management Taiwan Ltd. 'China's growth is comparatively higher, so to leverage on China's high growth will help boost our domestic demand.'

Taiwan businessmen have invested as much as US$100 billion in China since 1990. Last year, China overtook the US as Taiwan's biggest export market, with purchases of US$41 billion.

Chinese Petroleum and China Offshore plan to form by early next month a joint management committee, comprising four officials from each, to map out a plan for oil field development, said China Offshore's Mr Yang.

The two companies may extend their cooperation to include production of fuels such as gasoline and petrochemicals if the Tainan Basin venture 'turns out well,' he said, without elaborating. - Bloomberg.