The central government has given foreign oil companies a five-year exemption from an export tax imposed on the industry last year after they complained it was at odds with a long-standing practice of allowing them to export their share of oil from offshore fields tax-free. Foreign firms with so-called production-sharing contracts offshore will be exempt from the 5 per cent tax until August 1, 2012, according to a circular posted on the website of the Ministry of Finance. Any export taxes already paid will be returned. The tax, imposed on a wide range of basic materials, was introduced last October as part of an initiative by Beijing to rein in its ballooning trade surplus and to retain more energy and metals resources domestically as the nation increasingly relies on energy imports to feed demand for rapid industrialisation and urbanisation. The ministry also scrapped a provision exempting foreign firms from any export tax contained in regulations for oil exploration and production dating back to 1982. The exemption was granted to encourage foreign firms' participation in offshore oil and gas drilling, at the time a new but technology and capital-intensive industry. To participate in the sector, foreign firms must sign production sharing contracts under which they undertake to incur all exploration expenses. Once oil or gas is discovered, the foreign firms are typically entitled to share 49 per cent of the development costs and future output, with the remaining 51 per cent going to CNOOC, the listed subsidiary of China National Offshore Oil Corp, the nation's sole state company with the right to cooperate with foreign firms in offshore oil and gas drilling. 'The five-year export tax exemption was a result of lobbying by foreign firms which argued that regulations had exempted them from the tax since 1982,' a source close to CNOOC said. Foreign oil companies with production sharing contracts in offshore China include BG International, BP, Chevron, ConocoPhillips, Devon Energy, Eni, Husky Oil, Kerr-McGee and Royal Dutch Shell. A Shell spokeswoman said that as the company had only a minority interest in one producing offshore oil project and was not the operator, it did not decide on whether its oil was exported. It was not apparent whether the company would benefit from the latest exemption policy. The mainland imported 47 per cent of its crude oil demand last year compared with 42.9 per cent in 2005.