China launches National Oil & Gas Piping Network Corp to reform energy market

China officially separated the natural gas business from the country's "big three oil" by setting up an independent corporation, the National Petroleum and Natural Gas Pipeline Group, in Beijing on Monday. The move marks a significant step in the restructuring of China's natural gas market, which will make it more open and drive in more competitive private players. 

 

Following the move, industry insiders expect that more private firms will be able to get a slice of pie from China's booming natural gas market, which was for years monopolized by state-owned enterprises (SOEs). Some, however, are concerned that the decision will cast shadow over the profitability of SOEs, whose incomes from the natural gas business account for a lion's share of their total revenues.

 

About 40 percent of the new group's share is now controlled by the State-owned Assets Supervision and Administration Commission of the State Council, China's cabinet, while the "big three oils" own the remainder. PetroChina holds 30 percent, Sinopec 20 percent and the China National Offshore Oil Corporation (CNOOC) 10 percent. 

 

Relevant assets of the three SOEs, including natural gas pipeline network, gas storage and LNG terminals, will be transferred to the new group, media reports said. 

 

"It's an overhaul for the natural gas industry," a source close to the reform agenda told the Global Times. 

 

The creation of an independent entity does not only improve the efficiency and market fairness. More importantly, by introducing private firms, it will also accelerate the construction of basic infrastructure for natural gas, pushing China's drive for clean energy forward, the source explained.  

 

By the end of 2018, China had 96,000 kilometers of oil and gas pipeline - 63 percent of which was built by PetroChina, 31 percent by Sinopec and 9 percent by the CNOOC. 

 

However, the establishment of a new group that specializes in natural gas could mean the interests of the three oil giants suffer. An employee of PetroChina, who spoke on the condition of anonymity, told the Global Times that he is worried about whether or not the reform agenda and asset transfer can be pushed forward smoothly, without encountering opposition from SOEs. 

 

Revenue from the natural gas business accounts for 50 percent of PetroChina's incomes from its upstream businesses, news website caixin.com reported. 

 

Source:ECNS

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