enterprise

China launches state enterprise to manage oil and gas pipelines – Financial Times


China on Monday launched a new state-owned enterprise to manage the country’s oil and gas pipelines, as part of efforts to bolster the role of gas in the country’s energy mix. 

The majority of pipeline infrastructure currently run by state-owned groups China National Petroleum Corp, Sinopec and Cnooc will be handed over to the new company, in a move to provide other industry players fairer access, China’s official Xinhua news agency said. 

China is overhauling its oil and gas industry in a bid to reduce reliance on polluting coal and has also sought to secure its energy supply by diversifying imports of liquefied natural gas.

China’s pipelines, which already run at maximum capacity during peak seasons, are expected to need to handle 2.5 times the current gas demand by 2040, according to consultancy Wood Mackenzie. 

An ambitious government programme to swap out coal heating for gas across China’s north-east has been sluggish in the face of a lack of infrastructure and supply to meet the needs of the region. 

The official launch of the company, originally floated by policymakers over a year ago, comes just one week after a pipeline from Russia’s Gazprom began to deliver gas from Siberia to north-east China. 

The pipeline opening was hailed by Chinese analysts as a milestone for China’s energy security and efforts to move away from coal in the region.

However, financial publication Caixin reported last month that pipeline infrastructure to deliver the gas across Heilongjiang, a north-eastern province, was lagging behind schedule. 

“It’s tough to say if this was all part of a larger plan but it does seem to be working out in a way that should help continue to grow gas demand,” said Jeffrey Moore of S&P Global Platts.

The company’s establishment should make it significantly easier for second tier players in the market to book capacity on the pipelines, including for imports from Russia or Turkmenistan, Mr Moore said, adding that LNG was still a long way from matching coal’s position in China’s energy mix.

The announcement also comes one week after China’s State-owned Assets Supervision and Administration Commission of the State Council, or Sasac, released a plan to cut coal production by a quarter to a third in north-west China.

China’s continued aim to install new coal power plants, in spite of global pressure over carbon emissions, has dashed hopes that the world’s largest emitter was getting serious about pledges to reduce carbon dioxide output.

Wood Mackenzie analyst Max Petrov said the most significant impact of the company’s launch would be to lower gas pricing in the long term, although companies were likely to keep prices high in the near future to recoup losses.



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