The Chinese government is introducing a 5% tax on energy produced in the western province of Xinjiang, the Wall Street Journal reported. The policy is intended to allow the province to retain a greater share of revenues from oil and natural gas production in the region, which has seen significant ethnic unrest. The new tax is intended to ultimately be rolled out nationwide. It is expected to impact the profits of PetroChina (PTR.NYSE, 0857.HK, 01857.SHA) and China Petroleum & Chemical Corp (Sinopec). Xinjiang is the source of 13% of China’s crude oil production and 29% of its natural gas, which together accounted for 30% of the province’s economic output last year. Energy revenues only accounted for 1.5% of the provincial government’s fiscal revenues in 2007, but the new tax – which is to be based on value, not volume – is expected to increase revenues five times.
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