''They all belong to the government now,'' said Zhao pointing to bright orange drilling equipment visible amid heads of corn on his field about 1,000 kilometers southwest of Beijing. ''The government wants the oil.''

Reclaiming the Shaanxi wells is part of China's push to maximize domestic oil resources as it struggles to meet rising energy demand without adding to a swelling import bill.

Beijing has formed a venture with Royal Dutch/Shell Group to extract oil from shale rock and plans to spend US$3 billion (HK$23.4 billion) on refineries able to process cheaper, lower-quality oil from the Middle East to reduce import costs.

More domestic production would help cap a surge in Chinese imports that's contributed to record global energy prices, said oil traders such as Mitsubishi Corp's Tony Nunan.

``The focus is on China right now, and small cuts in its demand can have a huge impact on oil prices,'' said Nunan. ``The risk is too great to China if oil supply becomes super-tight.'' Oil in New York reached an all-time high of US$60.95 a barrel on June 27 and is up 49 percent up from a year ago.

For now, China's energy demand far outstrips what it can produce at home.

The nation's oil imports surged 35 percent last year to a record 122.7 million metric tons as PetroChina, China Petroleum & Chemical Corp and CNOOC - China's biggest oil companies - failed to produce enough to meet domestic demand in an economy that grew 9.5 percent. Imports accounted for about 40 percent of last year's consumption.

The nation's efforts to tap more resources at home won't be enough to close the gap between growth in domestic production - 2.9 percent last year and demand, which surged 15 percent.

``There'll still be huge cargo flow and imports of crude oil because domestic demand is very strong,'' said Akira Kamiyama, a Tokyo-based oil trader at Mitsui, Japan's second-largest trading company. ``Whether imports will slow is dependent on the level of inventory and reserves in China, and they don't have much.''

China's oil consumption more than doubled in the past decade, making it the world's second-biggest user behind the US. Domestic demand may rise 7.4 percent this year to 6.85 million barrels a day, the International Energy Agency forecasts.

China's imports are rising as output from domestic fields such as Daqing in northeastern Heilongjiang province - which accounts for a third of national production - declines.

Beijing-based PetroChina, which gets half of its oil from Daqing, drilled 46.4 million tons from the field last year, down from 48.4 million tons in 2003.

``Supply is tight and demand is strong,'' said Gavin Thompson, a Beijing-based energy consultant at Wood Mackenzie Consultants. ``There haven't been any major discoveries in China for a long, long time.''

Ma Kai, chairman of the National Development and Reform Commission, China's top economic planning agency, said the government aims to accelerate domestic exploration and production to meet energy demand.

The government is enlisting outside help. London-based Shell agreed to invest in a Chinese venture that will extract oil from shale rock in the northeastern province of Jilin.

Jilin province has potential shale-oil reserves of 300 billion tons. Proven reserves total 17.4 billion tons, 55 percent of the national total - six times last year's national consumption, official estimates show.

China is also assessing how much crude oil it can extract from oil sands.

In rural Shaanxi province - which had 1.19 billion metric tons of proven oil reserves at the end of 2004, according to the local government's foreign affairs office - a total of 2,400 wells have been reclaimed from private owners since 2003.

Farmers and businessmen, given ownership of the wells in 1995, lacked the efficiency needed to maximize output, said Wang Dengji, mayor of the Shaanxi city of Yulin.

``We made a mistake by letting the oil wells operate privately,'' said Wang, 51. ``Oil is such a sacred resource.''BLOOMBERG