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Felicity Bradstock

Felicity Bradstock

Felicity Bradstock is a freelance writer specialising in Energy and Finance. She has a Master’s in International Development from the University of Birmingham, UK.

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China’s Oil Industry Is Undergoing A Serious Makeover

China’s establishment of a national pipeline network, PipeChina, last October is creating a shift in China’s oil and gas industry, which aims to create greater competition and encourage new players in the sector.  PipeChina acquired the oil and gas pipeline assets, storage facilities, and import terminals of the three state-run firms, China National Petroleum Corp. (CNPC/PetroChina), China Petrochemical Corp. (Sinopec), and China National Offshore Oil Corp. (CNOOC) upon its creation last year in an attempt to make the industry more efficient.  

PipeChina acquired PetroChina’s Kunlun Energy Co. stakes, giving it a 60 percent share in its Beijing natural gas pipeline as well as a 75 percent share in its Dalian LNG company, at a cost of $6.23 billion. PetroChina gave up the most assets of the three majors in the deal. 

Following the restructure, PetroChina has taken a step back, but CNOOC and Sinopec have now opened more offices across the region to enhance distribution, decentralizing power for the first time. Sinopec also merged its natural gas upstream and downstream operations in anticipation of the change, aiming to expand its gas network in the region. 

In the Spring, PipeChina started on the construction of a $1.3 billion 413.5km-long natural gas trunk line in the north of the country. The pipeline is expected to transport 6.6 billion cubic meters of gas or around 2% of China’s total gas consumption.

The pipeline will be connected with the Power of Siberia line, bringing Russian gas to China, as well as being connected to the national Shaanjing pipelines. 

Related: Natural Gas Prices Fall Despite Bullish Outlook PipeChina is also altering the Chinese oil and gas industry by striving to meet green energy targets encouraged at the international level, aiming to increase its carbon emissions and energy consumption to a peak before reducing emissions from 2030. This is in line with China’s eventual net-zero aim for 2060.

When talking of the company’s plans to reduce its carbon footprint Tang Shanhua, deputy general manager of business operations at PipeChina, explained that "In the next step, we will optimize our energy consumption structure and purchase more electricity that is generated from renewable sources through market trading." 

PipeChina is currently exploring cold energy in liquefied natural gas (LNG) terminals and natural gas recycling as a means of reducing carbon emissions by the next decade. The firm is planning to establish more natural gas pipelines and storage facilities across the country but aims to eventually invest in hydrogen storage as well as carbon capture and storage (CCS) and transport technology as the world energy consumption gradually shifts away from fossil fuels. 

Related: Qatar: Peak Natural Gas Demand To Occur Around 2040

Just this week, Sinopec commenced construction on a CCS project in the east of China, expected to be the country’s biggest, as part of the firm’s aim to become carbon-neutral by 2050. The carbon dioxide will come from Sinopec's Qilu refinery in the Shandong province and will then be used for hydrogen production, where it will then be injected into 73 wells in the Shengli oilfield to enhance oil production.

Sinopec expects to inject 10.68 million tonnes of carbon dioxide into the oilfield over 15 years to increase crude oil production by as much as 3 million tonnes. Operations should commence by the end of the year with plans to carry out a similar project in the neighboring Jiangsu province.

As PipeChina aims to increase competition among national players by altering their roles in the oil and gas industry, as well as attracting new companies to participate in the sector, China’s majors are beginning to diversify their roles by expanding to the regional level and enhancing green energy practices through greater investment in innovative CCS and hydrogen production projects. This could be the move China needed to reinvigorate the national oil industry.

By Felicity Bradstock for Oilprice.com

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