By Xin Zhiming (China Daily)
Updated: 2007-07-11 08:27

Tax will be levied from August 1 on crude oil exports by foreign partners in offshore exploration joint ventures, the government said yesterday.

But it will grant companies a five-year holiday from the 5 percent export tariff if they are executing contracts they have already inked with Chinese partners, the Ministry of Finance and the General Administration of Customs said.

"The move is aimed at saving domestic resources and bringing the policy for foreign companies in line with that for domestic operators," Gong Jinshuang, a senior analyst at the economic and technology research institute affiliated to the China National Petroleum Corp, told China Daily.

China started to levy export tariffs from November on exports of resource-intensive products, such as oil and metals.

Analysts said the policy was to save scarce resources and energy, and dampen their exports. As international oil prices soared last year, some companies opted to export crude despite the fact that China needs to import more than 40 percent of its domestic crude consumption.

August supply of Brent crude was fetching $75.55 a barrel on the ICE Futures exchange in London yesterday.

It rose to an 11-month high to above $76 a barrel on Monday as rising global oil demand and North Sea field maintenance exacerbated supply worries.

Levying taxes on crude exports is a general practice in many countries, said Han Xiaoping, an energy analyst with China5e.com, a major energy website. "Chinese oil companies in other countries also pay such taxes."

The new policy will also provide a level playing field for domestic and foreign companies, which is in line with World Trade Organization principles, he added.

China's crude exports, including those by foreign joint ventures, in the first half of this year were 1.82 million tons, down 39 percent over a year earlier, according to Customs data.