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China Unveils New National Pipeline Operator in Key Industry Revamp

By Luo Guoping, Huang Kaixi and Han Wei / Dec 10, 2019 05:00 AM / Business & Tech

Photo: VCG

Photo: VCG

China officially debuted a long-awaited national oil and gas pipeline company Monday in a key step to overhaul the massive energy sector.

The creation of China Oil & Gas Piping Network Corp. will consolidate the pipeline assets of the top three state oil companies —China National Petroleum Corp., Sinopec Group and China National Offshore Oil Corp. — in an effort to remove barriers that have hampered domestic production.

The government will also encourage local oil and gas pipeline companies to integrate with the national company in “market-orientated ways,” Vice Premier Han Zheng said at the opening ceremony of the new company, according to the government website.

China’s oil and gas pipeline network totals 130,000 kilometers, including 90,000 kilometers operated by the three state giants. Research institutions estimated that the three companies’ pipeline assets have a combined net value of about 290 billion yuan ($41 billion), excluding terminals and storage facilities.

The new entity will be responsible for building and managing the main national pipeline network to ensure fair market practices in oil and gas distribution. The company will not participate in competitive upstream and downstream deals, according to the official Xinhua News Agency.

The new company still needs to work out details on the valuation of assets involved in the merger and organizational structures. Several industry sources told Caixin that they expect the new entity to start operation by September 2020 before the winter heating season.

CNPC accounts for nearly 80% of pipelines owned by the trio, followed by Sinopec’s 19%. Each company also holds stakes in a number of local pipeline companies.

Zhang Wei, general manager of CNPC, will be named chairman of the pipeline company, Caixin has learned. Hou Qijun, CNPC’s deputy general manager, will become the general manager of the new company.

Contact reporter Han Wei (weihan@caixin.com)

Related: China to Debut New National Pipeline Operator Next Week


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