Reuters quoted a government official said China has extended its resource tax on domestic sales of crude oil and natural gas to 12 western regions and provinces.

China started levying a 5% resource tax on crude and natural gas sales in the northwestern Xinjiang region from June 1 before spreading to other resources-rich provinces.

The official said it was last introduced in the northern Inner Mongolia region from December 1 without naming the specific regions.

The tax which is based on prices instead of the previous quantity based mechanism is expected to boost local government revenues but will cut into earnings of oil and gas firms such as PetroChina and Sinopec Corp.

The official said "The old resource tax, introduced since 1994, was very low. The crude and natural gas prices have soared since then, so we adjusted it to be based on sales. Previously, the resource tax on crude was around CNY 30 per tonne.”

The official added that for thick oil, high condensation oil and high sulphur natural gas, the levy is lowered by 40% or at about 3%.

Analysts however have said the impact on oil and gas firms' revenues may be mitigated by an increase in natural gas prices and possibly changes on windfall taxes on oil productions.

(Sourced from Reuters)