Mainland oil producer shares rose on Monday morning after the central government announced it would raise the threshold for a tax on oil sales revenues, reducing the financial burden on producers who have seen profits squeezed by sharp falls in crude oil prices since June. The minimum threshold for the levy will be raised to US$65 a barrel from US$55 from January 1, the Ministry of Finance said in a statement posted on Christmas Day. Shares of PetroChina, China’s largest oil producer, rose as much as 3.8 per cent on Monday morning and traded 2.4 per cent higher at HK$8.84 at 11.51am on the first trading day after the announcement. China Petroleum & Chemical (Sinopec), the second-largest producer, gained as much as 3 per cent and the No3 producer CNOOC rose as much as 2.5 per cent, before giving up some gains. The “special levy” on oil revenues was introduced in 2006 on all domestic crude oil output. Producers pay a tax on the excess of their average realised oil price from a base of US$40 a barrel. The tax was introduced so that Beijing could capture some of producers’ gains at a time of rapidly rising oil prices. In late 2011, the levy threshold was raised to US$55 a barrel, after producers’ bottom lines were pared by rising production costs. “It may look a bit controversial to raise the threshold to US$65 a barrel when oil prices have fallen to around US$60 a barrel, but the Ministry of Finance explained the move is mainly in response to escalating operating costs for upstream producers,” said CLSA head of Asia oil and gas research Simon Powell. After the adjustment, producers will pay US$1 on each barrel produced for the first US$5 of revenues in excess of US$65, US$1.25 for the US$5 in excess of US$70, US$1.5 for the US$5 in excess of US$75 and US$1.75 for the US$5 in excess of US$80. For revenues above US$85, a 40 per cent tax will be levied.