China's largest oil and gas producer, China National Petroleum Corp (CNPC), has reached a deal with Europe's largest oil refiner Total in jointly tapping the country's domestic oil reserve in a move to meet its surging demand for energy. 

The Sino-French oil company alliance will work on the Sulige gas field, located in the Ordos Basin in northwest China, Liu Weijiang, said CNPC spokesman for overseas business, quoted by Saturday's China Daily.

Industry sources said the Sulige field has gas reserves of up to 602.6 billion cubic meters.

"It is only a set of framework agreements, and more follow-up projects are still under discussion," Liu said on Friday.

The two oil giants on Wednesday signed two memorandums of understanding (MOUs) to scale up their footing in both markets through joint efforts, said a company statement on CNPC's website.

They also agreed to set up an oil and gas reserve exploration partnership in a third country, but the spokesman did not elaborate on the overseas assets that the two oil firms are eyeing.

"The partnership with Total marks a significant advance for CNPC in forging strategic relations with foreign oil conglomerates and expanding business," says the CNPC statement.

According to the statement, the partnership allows the companies to complement each other and sharpen their competitive edge. CNPC will benefit from improved corporate management and technology, while Total aims to increase its market share.

China, the world's fastest-growing major economy, relies on imports for almost 40 percent of its oil demand. Industry analysts forecast that proportion will increase beyond 50 percent by 2020.

The Chinese government has also set an ambitious target of accelerating natural gas use. It plans for natural gas to supply 8percent of the nation's energy needs by 2010 from the current 3 percent.

Such a huge demand potential has lured an increasing number of energy giants from both China and abroad to cash in on the business.

CNPC's deal came shortly after the nation's third largest oil producer, China National Offshore Oil Corp (CNOOC) signed similar MOUs with Thai oil companies to expand business in both the Thai market and overseas fields, last week.

CNOOC has agreed with Thailand-based PTT Public Company Ltd and PTT Exploration and Production, the two dominant companies in the Southeast Asian country's oil market, to explore and produce oil-gas products both in Thailand and abroad. The two sides also aim to find new potential for old fields in Thailand, according to a company statement.

A CNOOC spokesman said that the company plans to double oil production over the next five years, the China Daily reported.

(CRI October 2, 2005)