After the reform in power field, the mechanism reform on petroleum and gas is arriving. It is learnt from 2016 Petrochemical Industrial Development Conference held on April 13 that the trend of oil gas reform is to properly concentrate on upstream, reinforce the supervision on midstream, and bring full competition in downstream. It is a reform core of the upstream field to transform the registration system to bid inviting for the mining right; that of midstream industry is to separate the pipeline network; and the downstream section should focus on a series of measures and institutional arrangements for openness on export & import, processing and sales.
It learns that several opinions of deepening the oil gas mechanism reform have already been submitted to the State Council, which will be launched soon, and the supporting policies involved in detailed issues, like entry threshold, are being formulated now, with various disputes, according to Economic Information Daily on April 14. The openness for oil gas price attracts much attention. Industrial experts pointed out that it does not mean low price, and will be controlled by measures including tax.
“Currently, China’s oil gas industry faces complicated situation of depression in oil price, constant anti-corruption and mechanism reform,” mentioned Dong Xiucheng, China Oil Gas Industrial Development Research Center under China University of Petroleum, in the 2016 Petrochemical Industrial Development Conference.
Pang Xiongying, vice president of HIS, analyzed that international oil price averages from 40 to 45 U.S. dollars per barrel this year and it will slowly rebound in the future. Brent oil price will reach 80 U.S. dollars per barrel in 2020.
It is undoubtedly bad news to Chinese oil enterprises, whose cost ranges from 50 to 80 U.S. dollars, and depressed economy causes severe overcapacity of petroleum products domestically. The growth range of these products in China will suffer a downtrend in 2016, which is expected to be 3.9 percent to 330 million tons, according to Dai Jiaquan, head of Petroleum Market Research Institute under China Petroleum Economic & Technological Research Institute.
“We have adopted a series of measures to reduce the costs and improve the efficiency, but they almost do not work. Reform is still the key point to get rid of stuck. SOEs reform is not in the same pace with oil gas mechanism reform, which is the most difficult part for the state-owned oil enterprises now,” said staff in a state-owned oil enterprise.
It learns that mechanism reform on petroleum and natural gas has been prepared since 2014, and submitted to upper authority at the end of 2015. The State Council recently approves and forwards the Opinions on Deepening Key Work of Economic Mechanism Reform in 2016 of the National Development and Reform Commission, clearly proposing to launch several opinions and supporting policies to deepen the reform on petroleum and natural gas mechanism. Nuer Bekri, head of National Energy Administration, previously expected in the exclusive interview of Economic Information Daily that the said Opinions will be issued soon after the two sessions, and the supporting policies are firmly being studied and formulated; in the future, comprehensive or specialized pilots for oil gas reform will be carried out in some provinces and cities.
The reform will be firstly implemented in the upstream section, which suffers from great monopoly. For a long time, there are only four enterprises in China achieving mine prospecting and developing rights, such as PetroChina Company Limited (601857.SH), China Petroleum & Chemical Corporation (600028.SH), CNOOC Ltd. (00883.HK) and Yanchang Oil Field Co., Ltd., and the right to import crude oil are also firmly held by five large-scale companies, which blocks full competition in the market, and makes the private enterprise difficult to get involved.
“The reform core of this section is to open the mine prospecting and developing rights, transform the registration-based system to tendering system, and gradually cancel the prerogative rights. The establishment of entry standard is very important issue, requiring clear specification in the supporting implementation scheme after issuance of guideline. Currently, there still are disputes on what kind of enterprises can engage in exploration and development. In terms of upstream reform, oil service companies should be totally separated, but this round of reform has not mentioned it yet,” indicated Dong.
Last July, Ministry of Land and Resources (MOLR) announced to call for bids for petroleum and gas exploration area in Xinjiang, and transfer six exploration blocks, with reform pilots for oil gas exploration & mining initiated in Xinjiang. The vice minister of MOLR Wang Min has clearly indicated in the national land and resources work conference that pilot work in Xinjiang will be pushed and accelerated this year, and meanwhile, the MOLR will actively explore in other areas, strictly control the management, reinforce the work on its exit from the blocks, and enhance the competitive transfer. Based on this, temporary rules to competitively transfer the oil gas exploration blocks will be studied and formulated, with upstream exploration & mining market gradually opened.
At the meantime, crude oil import market is also accelerating its steps to open to diversified investors. Public data shows that 14 refinery plants gained the right to use imported crude oil in 2015, and ten obtained the right to import the crude oil. Especially, six of them achieved the two kind rights at the same time. Currently, the review and assessment work on applying for the said two rights initiates in 2016, compared to that of last year, various new standards are added, including standards on supplied oil.
“Referring to crude oil and refined oil products, China strictly restricts their export on the whole, but gradually opens the import.” Dong believed that full competition in the downstream also covers wholesale and retail right of refined oil products, opening the entry of oil storage right, and oil gas price reform. The bottom price for refined oil product can be cancelled now, and totally opened to the market. But certainly, it is still necessary to adjust and control the price level, which could be realized by taxation. Current reform on natural gas price focuses on improving the mechanism. The marketization of natural gas market cannot be realized forever, if the pipeline network is not separated. But there is not a final decision on whether to establish one or several independent pipeline network companies.”
It learns that related authorities are now discussing opinions on deepening the market-oriented reform of natural gas source price. The gas price in the upstream will not be different for residential and non-residential utilizations, and it is likely to become the same in 2016, and be fully open step by step. The final goal is to realize the openness of gas source and sales prices at the end of “13th Five-Year Plan” period, and the government only supervises the price of naturally-monopolized gas, which is transmitted and distributed through pipe network.
“Regulations, laws and administrative documents still restrict many aspects now, such as exploration and development in the upstream, pipeline in the midstream, examination & approval for refinery plants and etc., which need to be solved,” said Zhang Liucheng, vice president of Shandong Dongming Petrochemical Group.
Translated by Jelly Yi
Latest comments