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.

In 1994, Kuche gave a formal contract to a newly private firm called Ruipuseng Co. to haul away as much crude oil as it could, paying about $12 to the local government for every ton. The firm's partners put up about $250,000, they said in interviews. Half went for oil-pumping equipment, and the other half went to the local government.

For the first five years, the Ruipuseng investors lost money, but by 2000, with oil prices climbing, the venture became profitable. In 2002, the company extended its contract with the Kuche government and forged a joint venture with a firm from Qinghai province, Mangya Heli Development Co., which had a background in oil drilling and had experienced other disputes with CNPC.

The new venture, Deli Petroleum Development Co., punched some 80 new wells into the terrain. The Deli investors acknowledge that their contract forbids the drilling of new wells but maintain that their actions were not a breach because they simply sought to boost the pressure in the old wells.

But CNPC disagreed. "Their work was preparation for larger-scale prospecting and drilling," said Zhou Yikai, deputy general manager of a CNPC subsidiary that handles declining wells. "They have already violated the national mining and natural resources laws."

The expansion required significant capital to pay for the drilling work, newer pumping machines and road improvements. The Qinghai company brought in $25 million, but the partners also launched a drive for new funding, eventually bringing in more than 2,000 teams of outside investors.

Zheng Biao, who now runs daily operations, was one of the newcomers. Formerly a provincial office worker, he had no background in oil and little capital. But he had heard that there were riches in Kuche.

In April 2003, he came for a look. Several hundred men were sleeping in tents and cold sheds amid the all-night puttering of machinery. Discarded parts, blackened oil drums and beer bottles littered the dusty ground. Undeterred, Zheng borrowed money from friends and relatives, combined it with his own meager savings and sunk more than $125,000 into the project.

"It's remote, we have to swallow bitterness, and it's risky," Zheng said. "I don't care. I wanted to make a lot money."

Oil fever also reached Tongxin county in Ningxia province, one of China's poorest, where the Hui ethnic minority community saw it as a path to upward mobility. There, it reached Ma, a father of four who had been making a decent living buying wool from local farmers and selling it to spinning factories.

Ma had about $12,000 in savings. He borrowed another $12,000 from his siblings and began collecting more from local villagers. With Ningxia caught in a three-year drought, the oil business beckoned as salvation. Before he and a friend left for Xinjiang in November 2003, they had collected $360,000, he said.

"From what our friend said, and with the local government support, we thought it was a good investment," Ma said.

But even as Ma handed over the money, CNPC was already trying to shut the venture down.

In April 2003, two Toyota Land Cruisers had arrived, bearing officials from the giant state oil firm. According to Zheng, the leader of the party asserted claims over the wells. "He said, 'This is my personal asset,' " Zheng recalled. "He was extremely angry, rude and unpleasant. He vowed that he would put us out of business."

Zheng thought the local government would protect them. "Here, it's all about personal relationships," he said. "We pay our taxes. Why would they want us to stop?"

But the Tarim Oil Field Authority -- a local CNPC subsidiary -- soon filed a report with Xinjiang provincial authorities declaring that the venture had exceeded its rights to collect oil, according to investors. In late 2003, after an investigation, Kuche authorities ordered a shutdown. The venture pulled strings with local officials to resume less than a month later, but when CNPC found out the following year, another shutdown was imposed.

As the cat-and-mouse game continued, central government officials flew to Kuche in October 2004 to meet with local leaders and the private investors. They returned to Beijing without issuing a judgment. This May, working teams returned to Kuche for further investigation.

Summer brought a decision: a July 29 document signed by 10 central government ministries. "The oil wells and land ownership should be returned from the unqualified enterprises," the state decreed -- seemingly a victory for CNPC. But the private investors, hoping for more time, are focusing on the section of the ruling that addresses the sensitivity of the involvement of ethnic minorities in the project: "In order to maintain unity among different minority groups and preserve regional stability, the parties should negotiate with CNPC fully and seriously."

So far, no talks have been scheduled. At the oil field, the pumps still groan, depositing a trickle into pools carved into the desert floor.

Special correspondent Eva Woo contributed to this report.

Ma Changchun sank his life savings into a risky private oil venture in the high desert of China's Xinjiang Province.

In China's Xinjiang province, pumping devices called kowtow machines extract oil from wells abandoned by the country's largest energy firm.

Kowtow machines pump oil from wells abandoned in the high desert of China's Xinjiang province.

A tanker hauls a load of oil pumped by private entrepreneurs from abandoned wells in China's remote Xinjiang province.