Along with top guideline and a series of supporting measures issued for state-owned enterprises (SOEs) reform, concerned petroleum and natural gas system reform comes too. It is learnt that National Development and Reform Commission (NDRC) and National Energy Administration are leading the formulation of Overall Plan for Petroleum and Natural Gas System Reform.
A series of documents on this SOEs reform have clearly stipulated the reform direction for the oil and gas fields that pipeline network and operation will be separated with isolated main and supplementary functions; besides solely state-owned or absolutely-held forms implemented for pipeline network of natural monopoly, competitive businesses will be opened to the private capital.
Chief researcher of Chinese Enterprise Research Institute Li Jin told the journalist of National Business Daily that “opinions on mixed ownership reform only require solely state-owned or absolutely-held forms for pipeline network, narrowing natural monopoly range to the minimum and providing sufficient space for private capital. Pipeline network companies possibly belong to special function type after they are established, and will play a role in maintaining national economy security.”
Petroleum and natural gas fields to open to private capital
Li also said: “In other words, there was an industrial discussion previously that it is possible to separate petroleum pipeline networks of the three petroleum companies, and establish a parent pipe network company, which will provide space for reorganization and mixed ownership reform in this field.”
Recently, senior management proposed to boost the mixed ownership reform for petroleum and natural gas SOEs. NDRC vice director Liu He required that pilot work and demonstrations should be carried out for the mixed ownership reform in various fields, combined with reforms in the fields of petroleum, natural gas and etc. NDRC vice director Lian Weiliang also pointed out petroleum and gas reform plan will be issued this year, with a mixed ownership reform plan to be issued at the end of this year; projects meeting industrial policies and beneficial for transformation and upgrading will be pushed out for non-state-owned capital in the fields with high threshold, including energy (petroleum, natural gas and electric power).
Insiders believed that the mixed ownership reform aims to make both SOEs and private enterprises the winners. In terms of three large petroleum companies, staff will be greatly reduced after main and supplementary separation to reinforce main businesses, optimize benefits, and improve operating efficiency of the capital. For private capital, petroleum and natural gas reform will bring a large number of opportunities.
Pipeline companies expected to be established
In respect of specific measures to be taken in oil and gas sector, insider estimated the industrial chain will be the focus, and overall market oriented reform will be carried out on major links in the sector, including the transfer of mining right. Particularly, spinning off pipeline network will be a key step.
Li Jin estimated that three major oil companies may establish an independent oil network company through spinning off pipeline network. As opinions on mixed ownership reform only require oil and gas pipeline network to be solely state-owned or absolutely state-controlled, there will be minimum monopoly. As a result, private capital could gain sufficient flexibility.
Lin Boqiang, director of China energy research center in Xiamen University, said separation of pipeline network will contribute to the break of integrated monopoly, which could improve the competitiveness of the industry and bring huge impacts to the current landscape. Reform in oil and gas sector would generally be similar to the reform of electric power system, if a state pipeline network company was to establish in the future.
Though oil and gas sector have already gradually opened to private capital, not all private capital have the interest or ability to invest as capital requirement is huge and payback period is long. Besides, some insider indicated that under current mixed ownership reform in oil and gas sector, private capital face the dilemma of not being able to acquire high-quality and mature projects and not willing to invest in risky projects.
Li Jin said, it therefore depends on whether or not the three major oil companies are willing to open competitive sectors and cooperate with private capitals truthfully.
Translated by Adam Zhang and Jelly Yi
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