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Lehman, Lee & Xu - China Oil and Gas in the news

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In the News

Vital for China to set up crude oil market to serve economy

General manager, Shanghai Futures Exchange

There is an urgent need for China, which relies on imports for more than half of its petroleum needs, to establish a crude oil market.

The main purpose of such a market is to better serve the Chinese economy as the country has to buy a large amount of oil from the international market. A crude contract could help oil firms hedge their positions.

It's also essential for Asia Pacific to have a crude benchmark that can reflect the supply and demand fundamentals in this region, something that we don't have.

The Brent futures, the European benchmark for North Sea oil, are increasingly being seen as a global price reference since Brent started to trade at a premium to its US equivalent, West Texas Intermediate, last year.

That's in part because the US has been increasingly independent on energy supplies thanks to its achievement in unconventional oil and gas development. WTI has been increasingly seen a regional price and less referenced.

Therefore, we do need a price benchmark for Asia where economies are growing faster than the rest of the world.

Premier Wen Jiabao and the China Securities Regulatory Commission have made it clear the significance of the proposed crude futures on the Shanghai Futures Exchange. The launch of the crude contract will be the exchange's priority this year.

Web link: http://www.shanghaidaily.com/nsp/Business/2012/07/02/Vital%2Bfor%2BChina%2Bto%2Bset%2Bup%2Bc

Proposal to quadruple capacity of solar power

CHINA, the biggest supplier of solar power panels, plans to quadruple a domestic installation goal for sun-derived energy projects to 21 gigawatts by 2015 to help absorb excess supply of panels and support prices.

The target includes 1 gigawatt of solar-thermal power plants, Shi Lishan, deputy director of the National Energy Administration's renewable energy division, said yesterday. The plan will be issued "soon," he said.

China had planned 5 gigawatts of capacity in the five years through 2015 and 20 gigawatts by 2020. The government has considered an increase since last year as solar panel makers led by Suntech Power Holdings Co and Trina Solar Ltd suffer from cuts in European subsidies and a global supply glut that drove prices lower.

"With a significant tumble in photovoltaic prices, the timetable for mass use is ahead of time," said Lian Rui, a senior analyst for research company Solarbuzz. "The new target is still very conservative; we expect the installation to surpass 30 gigawatts."
Web link: http://www.shanghaidaily.com/nsp/Business/2012/07/03/Proposal%2Bto%2Bquadruple%2Bcapacity%2Bof%2B

Edward Lehman ʦ
Managing Director ³

Lehman, Lee & Xu is a top-tier Chinese law firm specializing in corporate, commercial, intellectual property, and labor and employment matters. For further information on any issue discussed in this edition of China Oil and Gas Lawyers Alert or for all other enquiries, please e-mail us at mail@lehmanlaw.com or visit our website at www.lehmanlaw.com and Mongolia www.lehmanlaw.mn.

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© Lehman, Lee & Xu 2012.
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