State-owned China National Petroleum Corp., the nation's biggest oil and gas producer, plans to invest in exploration and production in the restive northwest province of Xinjiang to hasten its development, Bloomberg reported.

Citing company officials who requested anonymity since the plan has yet to be disclosed, the wire agency said that CNPC plans to sell oil and gas field stakes to local investors for around 10 billion yuan or $1.6 billion.

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The transaction will be coursed through subsidiary PetroChina Co, which owns most of its CNPC's oil and gas fields in Xinjiang. PetroChina will reportedly offer stakes in at least two large untapped oil and gas fields this year, but the sources declined to provide details. Xianjiang has 1.55 billion barrels in oil resereves in Xinjiang, according to PetroChina.

The joint venture will only be open to companies backed by the Xinjiang government or Xinjiang Production and Construction Corp., the report said. Taxes will be paid to Xinjiang and not the central government. Bloomberg noted that Xinjiang Production and Construction was formerly a military unit that guarded Xinjiang's borders in the 1950s, but has since become a commodity company with interest in production of a range of products from cotton and fruit to coal and chemical products.

Bloomberg noted that Xianjiang, which has 30% of China's natural gas reserves and a quarter of its onshore crude reserves, plays a crucial in supplying the energy needs of the eastern and southern provinces of the country and its neighbors in Central Asia. The territory, however, has been a tinder box for protests as ethnic groups there vie for independence. The investment is part of the government's plan to boost growth in the region that is heavily dependent on CNPC whose operations account for a sixth of its economic output.

Earlier this year, CNPC stated its plans to invest 340 billion yuan in the province until 2020 to transform it into the company's biggest oil and gas production base, according to Bloomberg. It added that the company would is open to investors participating in Xianjiang's development.

Bloomberg's sources said CNPC is also considering letting other companies operate its oil and gas fields for a fee for their production.

With a population of around 22 million in an area around four times the size of California, Xinjiang Uyghur Autonomous Region is the largest area of its type in China and has borders with Russia, Pakistan and Afghanistan, according to Bloomberg. 

TagsPetroChina, China National Petroleum Corp., Xinjiang