The oil deposit in the Qiangtan Basin extends over 100 kilometres (60 miles) and may hold as much as 100 million tonnes of oil, according the official Xinhua news agency.

The Chinese government has ambitious plans for Tibet, which include developing five airports and building a railway linking the mountainous region to the outside world.

Earlier this year, the Chinese government pledged to spend $3.8bn (�2.6bn, 4.1bn euros) to complete more than 100 construction projects in Tibet.

Oil extraction in Tibet's mountains is likely to attract criticism from environmentalists and human rights activists.

Protests

Both BP and Royal Dutch Shell took stakes in China's national oil giants when PetroChina and Sinopec floated on the international stock markets in 2000.

BP faced calls to disinvest its 2.2% stake in PetroChina at its April shareholders' meeting because of human rights concerns about a pipeline in Tibet.