KUCHE, China -- Into the red earth of the Gobi Desert, Ma Changchun sank all the money he had scraped together in his 45 years. He added the life savings of nearly 300 friends, relatives and neighbors from his village, most of them poor farmers who knew little about business.
Together, they invested in an oil venture on a remote expanse of China's northwestern frontier, tapping wells abandoned more than a decade ago by the country's largest energy company, China National Petroleum Corp. They bet there was enough oil left there to lift them to new lives.
What they did not bet on was that CNPC, an enormous firm controlled by the Communist Party government, would complain that such private ventures in Xinjiang province threatened its hold on other assets. Last month, central government officials ordered the private drillers to cease operations. Now, Ma and some 500 other wildcatters are in limbo, clinging to their encampments on the parched soil of the Yiqikelike oil field.
"I'm under enormous pressure," said Ma, explaining how he carries the aspirations of hundreds of villagers in Ningxia province. "If I ever went back, they would find me to demand where their investment is. We're ordinary people. We don't care about these ownership issues. But if anyone is going to take our livelihood away, we'll fight until we die."
This battle in the high desert of Xinjiang underscores the perils still confronting small, private investors in modern-day China. It also highlights a conflict between the central government -- which typically sides with state-owned firms, because they pay taxes directly into its coffers -- and local authorities, which have come to count on private businesses for their own tax revenue as well as jobs.
CNPC is one of a handful of state-owned giants nurtured with protected-monopoly status and virtually unlimited credit. Its best-known subsidiary, PetroChina, is listed on stock exchanges in New York and Hong Kong. The company is crucial to China's leaders now, as Beijing encourages energy firms to search for new sources of oil.
Xinjiang, a semi-autonomous province more than twice as large as Texas, has become the centerpiece of China's energy plans, with its fields expected to become the country's largest source of oil by 2010, according to state estimates. Kuche -- an ancient Silk Road town whose dreary concrete-block buildings belie that legacy -- sits on the edge of the Tarim Basin, which boasts half of Xinjiang's oil reserves.
But even as the area has helped power China's industrialization, local fortunes have lagged. This has fueled resentment among the largely Muslim Uighur people, the ethnic minority that predominates in Kuche and most of Xinjiang. They have seethed as the bulk of the energy boom's benefits have been captured by majority Han Chinese. For China's leaders, concern about ethnic tensions has grown with the widening income gap between the neon-lit cities of the east coast and the poverty of the hinterlands.
In recent years, Kuche has sought to exploit its natural wealth to create jobs. Since 2001, the local government has courted investors that have erected new refineries on the eastern fringes of town. For the past two years, the Kuche government has been buying every drop of oil extracted by the private entrepreneurs at the abandoned CNPC site, then selling it to these new local refiners. But CNPC and other state energy firms have remained unwilling to sell crude oil to local refiners lest they undercut their own refining ventures.
Yiqikelike, the first oil field developed in Xinjiang, was drilled in 1958 by Chinese engineers with Russian help. It sits more than 80 miles from the county seat, accessible only by a rough gravel road. Where the only other local industry had been sheep herding, a veritable city took shape -- with brick dormitories housing some 20,000 workers who supported the drilling rigs beneath snow-capped peaks.
For a time, the field yielded 30,000 tons of crude oil a year. By the 1980s, however, production had slipped and costs were climbing. In 1986, the Xinjiang Petroleum Administration Bureau -- a state entity that was a forerunner to CNPC -- ceased operations. Today, the city is a ghost town, the old structures scoured down by the elements to resemble the tan boulders that punctuate the stark landscape.
Some oil continued to gurgle to the surface. In 1987, the government for Akesu district, which includes Kuche, complained to Xinjiang provincial authorities that oil from the wells threatened local drinking supplies. Akesu sought and gained the power to allow villagers to collect whatever oil sprung from the wells. With local government encouragement, peasants with donkey carts began hauling away oil in buckets.
Private Investors Sink Hopes Into Desert