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Chinese oil market ‘unbuilding’

23.12.2019
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The Chinese authorities have created a national operator for the transportation of oil and gas, giving it all the main oil and gas pipelines in the country. Previously, they belonged to state-owned oil and gas companies. The idea behind Chinese "unbundling" is to increase competition in the country's oil and gas market.

On the 9th of December, Chinese authorities announced the creation of the China Oil and Gas Transportation Corporation. It is going to incorporate all the pipelines that were previously operated by the Chinese oil giant CNPC, the world's largest oil refining conglomerate Sinopec and CNOOC, which is engaged in offshore hydrocarbon production. In total, 90,000 kilometres of pipelines were at the disposal of China Oil and Gas Piping Network Corporation. They are estimated at $ 41 billion. According to EurAsia daily, the new nationwide operator will begin full-fledged asset management by September 2020. EurAsia Daily has further reported that an anonymous representative of the Chinese authorities has also commented on the issue by stating that - "The creation of a new company separates transportation from production and sales and, thus, opens up access to transportation for new companies, which will create conditions for the development of competition". According to the Xinhua News Agency in the new corporation, 40% will belong to the Commission for Monitoring and Management of State Assets, 30% to CNPC, 20% to Sinopec, and 10% to CNOOC.

By creating a transportation company, Beijing is trying to solve several problems at once: on the one hand, this is the eradication of abuse in vertically integrated state-owned companies, which previously could have unfairly decided who should be given access to the system. On the other hand, this is the development of competition and the energy market.