Caixin
Dec 07, 2019 05:42 AM
BUSINESS & TECH

China to Debut New National Pipeline Operator Next Week

China consolidates oil and gas pipeline assets of major state oil giants in a key overhaul of the industry. Photo: Bloomberg
China consolidates oil and gas pipeline assets of major state oil giants in a key overhaul of the industry. Photo: Bloomberg

(Bloomberg) — China will announce the creation of its long-planned national oil and gas pipeline company Dec. 9, according to people familiar with the matter, as it completes a significant restructuring aimed at helping energy supply keep pace with swelling demand.

A ceremony to launch the company has been set for 10 a.m. Monday in Beijing, said the people, who asked not to be named as the information isn’t public.

The government will merge networks operated by three state-owned giants under a single operator, a key step to removing barriers that have hampered domestic production. The move dovetails with efforts to use more gas instead of coal.

Media representatives of the new pipeline operator didn’t respond to an email seeking comment. The State-owned Assets Supervision & Administration Commission, which oversees centrally owned enterprises, didn’t respond to a faxed request for comment. Nobody answered calls to the media departments of the three companies involved ― China National Petroleum Corp., Sinopec Group and China National Offshore Oil Corp.

The company’s creation has been under consideration since at least 2014 and is part of President Xi Jinping’s drive to streamline industrial capacity among state-owned enterprises. The government is seeking to spur wider natural gas distribution and upstream exploration by shifting ownership from competing producers to a single operator, which can make decisions based on overall national energy needs.

The pipeline combination is also designed to help smaller private or foreign companies, which have found access to infrastructure blocked or prohibitively expensive. With the assets stripped from the hands of the big three state enterprises, other companies can gain access and move supply to where it’s needed.

The plan follows other Chinese overhauls aimed at creating a more level playing field for private and state-owned enterprises. As well, the nation has been accelerating the restructuring of its energy sector in recent years, including changing its gas pricing policy and merging power giants.

Policymakers have also embarked on a campaign targeting pollution, replacing coal with gas for industrial and residential uses. That’s boosted demand for the cleaner-burning fuel faster than pipelines can support it, giving China added urgency to push forward the latest revamp.

The change will mainly affect PetroChina Co., the listed unit of CNPC, which controls about 70% of the nation’s networks. Its shares in Hong Kong sank to their lowest since 2004 this week amid concern the company’s earnings and cash flow would be diluted as it loses one of its most prized assets.

Zhang Wei, general manager of CNPC, is likely to be appointed chairman of the pipeline company, according to local media.

Contact editor Han Wei (weihan@caixin.com)


You've accessed an article available only to subscribers
VIEW OPTIONS
Share this article
Open WeChat and scan the QR code