China Set To Launch $105-Billion Oil & Gas Pipeline Firm

By Tsvetana Paraskova

Chinese flag

China will officially launch on Monday its long-mooted state oil and gas pipeline group combining the infrastructure assets of the state-owned energy majors into one huge midstream group, which analysts say could be worth between US$80 billion and US$105 billion.

China has considered for years creating such a company, but only this year has it approved the setting up of a state-held oil and gas pipeline group.

The new company is part of China’s efforts to allow its energy companies to focus on boosting exploration and production.

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.

The pipeline plan is 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.

The launch of the new oil and gas pipeline group is scheduled for Monday and is expected to be attended by China’s Vice Premier Han Zheng, Reuters quoted a notice from the Preparation Group of National Oil and Gas Pipeline Company as saying.

According to Wood Mackenzie, the new pipeline company may be worth between US$80 billion and US$105 billion. The creation of a state pipeline behemoth is a step in the right direction, but it will likely result in a short-term gas price increase, the energy consultancy said in October.

The two key factors underpinning China’s pipeline ‘reform’ are insufficient existing pipeline infrastructure to meet continuously growing demand and unfair access to the infrastructure at present, according to Wood Mackenzie consultant Xueke Wang.

After two to three years of operation, the company will likely look to list shares on the stock market in order to have access to additional funding for investment in pipeline infrastructure, WoodMac said.

By Tsvetana Paraskova for Oilprice.com