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UPDATE 2-China plans to create national natgas pipeline company - sources
September 26, 2017 / 5:33 AM / 3 months ago

UPDATE 2-China plans to create national natgas pipeline company - sources

(Adds analyst’s comment; background on companies’ internal restructuring)

By Chen Aizhu

BEIJING, Sept 26 (Reuters) - China’s state economic planner has revived a plan to create a national natural gas pipeline company that will give gas producers better access to infrastructure and to increase the use of the fuel in the world’s third-largest gas consumer.

The National Development and Reform Commission (NDRC) is working with state oil companies China National Petroleum Corp, Sinopec Group and China National Offshore Oil Co on the proposal, said three senior officials familiar with the plan.

“The NDRC is engaging a small group of company people to design a plan for creating the national pipeline company,” said one of the sources.

The talks will examine what assets would be included in the company, who will be the main stakeholders and how it will be run, the sources said.

The plan, first raised about five years ago, is part of Beijing’s proposed reforms to make the state-dominated oil and gas sector more efficient. It follows a string of smaller steps over the past two years, including cutting down transportation costs and encouraging investment in gas storage.

CNPC controls nearly 80 percent of the country’s main natural gas pipelines while Sinopec has the second-largest stake. China National Offshore Oil Co is the leading operator of receiving terminals for liquefied natural gas.

The NDRC did not immediately respond to a request for comment. The three sources declined to be named as they are not authorized to speak to the media.

“A national pipeline company will certainly lead to better and fairer access by upstream gas producers, while the current set-ups of pipeline divisions under state oil firms will be subject to serving mostly parent companies’ needs,” said Lin Boqiang, a senior energy researcher with Xiamen University.

But Lin cautioned this would be a complex and time-consuming project as it involves a massive restructuring of assets worth tens of billion dollars.

The proposed national pipeline company is expected to oversee China’s trunk line projects such as the West-to-East pipelines operated by CNPC and Sinopec’s project linking gas fields in the southwestern province of Sichuan to the east coast, said the sources.

Both CNPC and Sinopec have already divested part of their gas pipeline businesses. Sinopec announced plans a year ago to sell half of its Sichuan-East China pipeline business, eight months after a similar but larger-scale restructuring at rival CNPC.

China is the world’s third-largest gas consumer after the United States and Russia, with imports of the fuel making up about a third of consumption.

China, the world’s biggest energy user, wants to increase the use of natural gas, which emits half of the greenhouse gases produced by burning coal, to about 15 percent of the total energy share by 2030 from just under 6 percent currently.

The NDRC said earlier this year it expects the country’s gas pipelines to total 104,000 km (64,600 miles) by 2020, up from 64,000 km at the end of 2015. China’s gas grid is less than a fifth the size of the U.S. system.

Reporting by Chen Aizhu; Editing by Richard Pullin and Christian Schmollinger

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