China is considering using part of its huge foreign exchange reserves to set up a fund for overseas energy exploration and acquisitions as part of a state plan to encourage offshore expansion, the nation's top oil producer said yesterday.

China will also offer subsidies and capital injection to firms which make overseas oil investments, China National Petroleum Corp said on its Website, citing a three-year state energy plan.

It has been long suggested by experts that China tap its US$1.95 trillion reserves, the world's biggest, to buy resources abroad. CNPC's remark coincided with an article in Outlook, Xinhua's weekly magazine, published yesterday.

"It's foreseeable that China's economic growth would remain fast over a very long period, which means it has to increasingly rely on external resources. (China) should take advantage of the current weak commodity prices in global markets by boosting certain strategic resource imports and converting some capital reserves into resources reserves," Outlook said in the article on how China could make better use of its forex reserves.

Crude oil price has tumbled over 70 percent from the all-time high of US$147.27 a barrel in July last year.

China aims to boost crude oil production to 192 million tons and natural gas output to 86 billion cubic meters in 2009, up 1.2 percent and 13 percent, respectively from 2008, CNPC said. The government has also set 2010 and 2011 targets of 196 million tons and 198 million tons for crude, and 105 billion and 120 billion cubic meters for gas, it said.

China also targets a total refining capacity of 440 million tons by 2011, CNPC said. It would push forward joint-venture refinery projects with companies from Venezuela, Qatar and Russia which could supply crude.

China processed 342 million tons of crude in 2008, with an estimated capacity of 396 million tons.

There are also plans to build liquefied natural gas receiving terminals in Qingdao, Ningbo, Tangshan and Zhuhai, and boost the capacity of the strategic petroleum reserves to 44.6 million cubic meters, according to CNPC.

(Shanghai Daily February 17, 2009)