BEIJING -- China, the world's biggest energy user after the United States, is drafting policies such as tax incentives and discounts to boost exploration for heavy oil resources such as oil sands and oil shale to meet demand.

Oil prices between US$30 and US$40 (HK$234 and HK$312) a barrel would make it economical for companies to extract oil from sand and rock in China, said Zhao Xianliang, deputy director of mineral resources and reserves at the Ministry of Land and Resources, Sunday.

Exploration for oil sands and oil shale is part of China's push to maximize domestic energy resources as it struggles to meet rising energy demand without adding to a swelling import bill. Oil imports rose 14 percent to 120 million tonnes in the first 10 months of this year and the cost of importing the fuel climbed 44 percent to US$56.1 billion in the same period.

"We are still at an initial stage of developing the heavy oil resources and high oil prices are conducive for such projects," Zhao said. "We've made suggestions to the government on incentives, but it may take some time before they are approved."

The Land and Resources Ministry puts China's explorable reserves of oil sands at about three billion tonnes and recoverable oil shale reserves at 12 billion tonnes.

China's oil demand may rise 6.2 percent to 7.01 million barrels a day this year, the Paris-based International Energy Agency said last week in its monthly Oil Market Report. Oil use may increase 5.4 percent to 7.39 million barrels a day next year.

Source: Bloomberg