Bidding Successfully for Oil and Gas Projects in the PRC

For many multinational players in the oil and gas industry, China has been an emerging market with some of the largest and the most attractive business opportunities over the last few years. This is particularly true because of the commitments China has made for its accession to the World Trade Organization (the WTO), which allow further market access as well as investment to foreign participants in the oil and gas sectors. Such commitments are reflected in this year's Foreign Investment Industrial Guidance Catalogue   (外商投资产业指导目录) (the Catalogue), where the exploration and exploitation of oil and natural gas are listed as "encouraged" foreign invested projects.

The investment opportunities are not without their challenges. One of the main problems that foreign investors have faced over the years is a lack of clarity and competitiveness in the procurement process for large infrastructure and other construction projects. With the increase in the number of such projects since the beginning of the 1990s, came problems of transparency, unfair competition in the project procurement process and quality concerns. The government's decision to introduce legislation in this area was therefore driven by the political will to promote competition and transparency, as well as by pressure from multilateral agencies and China's impending membership in the WTO. The PRC, Invitation and Submission of Bids Law  (中华人民共和国招标投标法) (the Bidding Law) was promulgated in August 1999 and became effective on January 1 2000. Since then, the State Development and Planning Commission (the SDPC) and other relevant ministries have promulgated a series of regulations relating to the Bidding Law that set down certain implementing rules.

This article presents an introduction on the laws governing foreign investment in the oil and gas sectors before taking a closer look at the Bidding Law and its related regulations in the context of foreign participation in oil and gas projects in China.