China Creates State-Owned Pipeline Company

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China has created a new centrally administered, state-owned pipeline company that combines all pipeline assets of the top three state-owned energy giants: China National Petroleum Corp., China Petrochemical Corp., and China National Offshore Oil Corp.

Considered the sector’s largest reshuffle in two decades, the change is designed to open access to China’s pipeline infrastructure to private and foreign energy producers to spur oil and gas exploration. The open pipeline network will allow companies to focus on exploration without any additional costs to move the fuel to market.

Chinese Vice Premier Han Zheng attended the inauguration ceremony of the newly-formed national oil and gas pipeline company, saying it is an important measure to deepen the reform of the oil and gas system and the reform of state-owned assets and state-owned enterprises (SOEs).

The founding of the new centrally-administered SOE is an important step forward in promoting the reforms of China’s oil and gas system and state-owned assets and enterprises, which has a significant impact on improving the allocation efficiency of oil and gas resources, promoting the high-quality development of the oil and gas industry, ensuring national energy security and better serving economic and social development, Han said.

Han, also a member of the Standing Committee of the Political Bureau of the Communist Party of China Central Committee, called on the company to help forge a fully competitive oil and gas market with effective concentrated transport through a unified pipeline network.

Chinese Premier Li Keqiang also made an instruction on the founding of the new company, asking it to improve the allocation efficiency of oil and gas resources and better serve the country’s strategy and people’s demands.

Beijing started considering reforming the pipeline sector nearly a decade ago but NDRC finally formulated plans in 2017 while examining China’s natural gas system as part of its plan to replace coal with gas.

“That is why it’s taking so long to happen. The reform means the big oil companies losing part of their competitive edge,” said Lin Boqiang, the director of the Energy Economics Institute at Xiamen University who is also an independent member of PetroChina’s board of directors.

China’s economic planner, the National Development and Reform Commission (NDRC), approved the plan for the new pipeline company in March, including details of assets to be incorporated, and final approval from China’s State Council is still pending, said one of the sources.

China is the world’s second-largest oil consumer and third-largest natural gas user, but its 82,600-mile (133,000-km) oil and gas pipeline network is less than one-fifth the size of the system in the United States, the world’s biggest oil and gas consumer.

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