BUSINESS China launches energy transport group to improve efficiency, fairness

BUSINESS

China launches energy transport group to improve efficiency, fairness

Global Times

05:46, December 10, 2019

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Employees monitor natural gas transmission facilities in Zibo, East China's Shandong Province. (Photo: VCG)

China officially separated the energy transport business from the big three state oil companies on Monday by establishing a corporation known as the China Oil & Gas Piping Network Corp. 

Premier Li Keqiang stressed that the establishment of the new enterprise should promote reform and innovation, and improve the efficiency of the allocation of oil and gas, in a bid to better serve national strategies and improve people's welfare.

It's a significant step in the restructuring of China's energy sector, analysts said, making it more open and attractive to competitive private-sector players. 

The new company will specialize in financing, building and operating long-distance oil and natural gas pipelines and dispatch facilities, China Central Television (CCTV) reported on Monday.

As an essential part of the reform of the natural gas industry, it could help form open upstream and downstream markets while controlling the middle segment, which deals with transportation, said Chen Zhanming, an associate professor of the School of Applied Economics at the Renmin University of China.

It offers non-discriminatory access to participants from different sectors to enter the upstream and downstream ends of the industry, Chen said, by removing their concerns about transporting energy to consumers.

Industry insiders said more private companies will be able to participate in China's booming gas market, which for years has been monopolized by state-owned enterprises (SOEs). Some observers, however, expressed concerns that SOEs' financial conditions may be affected. 

Their income from natural gas businesses account for a steady share of their total revenues. About 40 percent of the new group's shares are controlled by the State-owned Assets Supervision and Administration Commission of the State Council. The big three oil companies hold the rest - PetroChina with 30 percent, Sinopec with 20 percent and China National Offshore Oil Corp (CNOOC) with 10 percent, according to media reports. 

Relevant assets of the three SOEs, including natural gas pipeline networks, gas storage facilities, and LNG terminals, will be transferred to the new group. 

"It's an overhaul for the natural gas industry," a source close to the reform agenda said, noting that the creation of an independent entity will improve efficiency and make the market more transparent. By introducing private companies, it will also accelerate the construction of basic infrastructure for energy sectors.

As of the end of 2018, China had 96,000 kilometers of oil and gas pipelines - 63 percent built by PetroChina, 31 percent by Sinopec and 6 percent by CNOOC. 

However, the establishment of a new group that specializes in energy pipelines could mean the interests of the three oil giants may suffer. An employee of PetroChina, who spoke on condition of anonymity, told the Global Times that he is worried about whether the reform agenda and asset transfer can go forward smoothly, without encountering opposition from the SOEs. 


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