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China Readies State Oil, Gas Pipeline Firm In Major Asset Shakeup

China gas pipeline

China is set to announce this year the creation of a state-held oil and gas pipeline company, combining the midstream assets of the national firms in a bid to allow energy companies to focus on boosting exploration and production, Reuters reported on Wednesday, citing three people with knowledge of the plans.  

Combining China’s pipeline infrastructure into one firm and opening access to this infrastructure to foreign and private producers would help the state oil and gas firms to focus on exploration at a time when China aims to increase its domestic production.

China’s National Development and Reform Commission (NDRC)—the economic planning body—has already approved the plan for the major reshuffle, while the State Council has yet to issue a final approval, one of Reuters’ sources said.

The plan would be the biggest energy ‘reform’ in China since 1998 when the country restructured its oil and gas sector and created China Petroleum & Chemical Corporation, or Sinopec, and PetroChina, according to Reuters.

A pipeline company would be a fourth major state energy firm, alongside Sinopec, PetroChina’s parent firm China National Petroleum Corporation (CNPC), and China National Offshore Oil Corporation (CNOOC).

Of the current large energy companies, PetroChina will be the most affected by the plan because it currently controls 70 percent of the oil pipelines and almost 80 percent of the major gas pipelines.

PetroChina told Reuters in an email that it hopes that the plan for asset reshuffle would take place in “accordance with the principle of marketization” to address the company’s concern about how its pipeline assets would be valued. 

Lin Boqiang, an independent board member at PetroChina and Director of the Energy Economics Institute at Xiamen University, told Reuters that the pipeline asset reshuffle could set the stage for China to reform the dominance of Sinopec, PetroChina, and CNOOC over domestic exploration and let independent companies also explore for oil and gas.

By Tsvetana Paraskova for Oilprice.com

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