China has extended key tax incentives for its offshore energy sector and natural gas imports, aiming to bolster domestic energy security and production capabilities. The policy, effective throughout the 15th Five-Year Plan period from January 1, 2026, to December 31, 2030, involves import duty exemptions and value-added tax (VAT) refunds.

Import Duty Exemptions for Offshore Projects

The policy exempts import duties on equipment, technical data, instruments, spare parts, accessories, and specialized tools required for offshore exploration and production, but only for items that cannot be manufactured domestically or when existing equipment is insufficient for project needs. Eligible projects include Chinese company-operated offshore oil and gas exploration and production, offshore oil and gas pipeline emergency response projects, and Chinese-foreign joint offshore exploration and production projects (including those approved before December 31, 1994). This is an extension of a previous policy, but the updated version for 2026-2030 excludes onshore oil, gas, and coalbed methane projects.

Administration and Supervision

The Ministry of Natural Resources will supervise offshore oil and gas geological surveys. For exploration and production operations, the three state-owned majors—CNPC, Sinopec, and CNOOC—will act as project supervisory authorities, with CNOOC additionally overseeing offshore pipeline emergency response projects. Other companies with hydrocarbon exploration rights conducting offshore upstream projects must apply to the Ministry of Finance for the duty exemption, with an annual application deadline at the end of April.

VAT Refunds for Natural Gas Imports

The government will also provide VAT refunds on imported natural gas (pipeline gas and LNG). For gas imported under long-term trade deals signed before the end of 2014 and approved by the National Development & Reform Commission (NDRC), importers will receive a 70% VAT refund. For other gas imports where the import price exceeds a benchmark set by the NDRC and the National Energy Administration, the VAT refund will be 80% of the price-cost inversion ratio. This ratio is calculated as (import price minus benchmark price) divided by the import price, then multiplied by 80%, with calculations performed on a quarterly cycle.

Policy Objectives

These measures are designed to strengthen China's domestic upstream industry, support natural gas import and utilization, and enhance the overall energy production, supply, storage, and sales system. The policy aligns with national goals to ensure energy supply stability, enhance offshore exploration and emergency response capabilities, reduce company import costs, and advance towards becoming an "energy superpower."