The National Development and Reform Commission (NDRC) will strengthen the regulation on the prices of short pipeline transportation and gas distribution within a province after setting the pricing of pipeline transportation across provinces. It will further introduce supporting documents on the interconnection and liberation of oil and gas pipeline network in the future. The reform of the oil and gas system will speed up.
The CPC Central Committee and the State Council released the Certain Opinions on Deepening the Reform of Oil and Natural Gas Systems (hereafter referred to as the Opinions) in May. Based on the 1 plus N model, the top design will be supported by various ancillary documents as well as plans on comprehensive reform pilots and specific reforms. “We are preparing specific supporting policies,” indicated Li Yinghua, deputy head of the department of oil and natural gas under the National Energy Administration (NEA). It is disclosed that the reform will be promoted in the pipeline network first.
It is learnt that the oil and gas transmission and distributed are mainly conducted by PetroChina China Petroleum & Chemical (Sinopec) and CNOOC, which account for 85 percent, 8 percent and 5 percent, respectively. The NDRC’s statistics show that 13 cross-province pipeline transportation enterprises own about 45,000 kilometers of pipeline. About 195 billion cubic meters of natural gas was transported in 2016.
According to the Report on the Development of Natural Gas in China (2017) jointly prepared by the department of oil and natural gas under the NEA and other authorities, different enterprises have insufficient interconnection of infrastructure currently. The natural gas pipelines in certain provinces have barriers. The charges on the access to urban gas are high, which have become main sources of profits of certain gas enterprises. Third parties cannot get access to infrastructure for natural gas.
As a matter of fact, the NDRC has released documents on the reform of the transmission and distribution systems and the access of third parties since last October. It conducted reviews on the cost and the pipeline transportation of 13 enterprises with unified standards in the first half. The average price of pipeline transportation of 13 enterprises has decreased about 15 percent after the review.
“The review on the transportation price of natural gas transportation enterprises will have far-reaching influence on the construction of the domestic natural gas market and relevant industries.” A responsible person from the NDRC indicated that it will promote the opening of the pipeline network to third parties. According to the method on pricing and cost of pipeline transportation of natural gas, the pipeline transportation price will be pegged with the load. When the loading of pipeline transportation enterprises is less than 75 percent, the actual returns will be lower than the permitted returns. Certain enterprises are preparing to open the pipeline to third parties to improve the loading to obtain the approved returns.”
This is just a beginning. It is learnt that NEA conducted a survey specific to oil gas system reform in Shaanxi province, studied local government and enterprises’ understanding and opinions on the guidance, basic principles, overall philosophy and major tasks about the petroleum and natural gas system reform, and carried out supporting policy measures of the Opinions.
Liang Changxin, head of the law and system reform department of the NEA, indicated that when faced with several problems about development of mining right, separation of railway network and passenger and goods transportation through railway, development and utilization of natural gas, and reform benefiting local places, the NEA will continue to communicate with various parties and listen to their opinions and suggestions to ensure fulfillment of system reform task by combining top-level design of the central government and initiative of local governments.
Li Yinghua disclosed that the NEA will promote connectivity of pipeline, break monopoly and improve the ability of distributing resources in next step. It recently issued documents related to connectivity of oil and gas pipeline network to local places and specified what kinds of pipeline facilities need to be connected. It will provide suggestions on accelerating construction of natural gas infrastructure and natural gas peak-shaving mechanism in the future.
“Recently, a study on fair liberation of oil and gas infrastructure was concluded. It is in fact an implementation rule of the NEA in the future and will be released later. Liberation of pipeline network was just required in policy in the past, but there are punishment measures for those who are able to but didn’t open the pipeline network,” said the above-mentioned person.
Translated by Star Zhang