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China launches state-owned oil and gas enterprise to manage main pipelines

By Ramla Soni

China’s pipelines are expected to need to handle 2.5 times the current gas demand by 2040

China has launched a new state-owned oil and gas enterprise to manage investment, construction and interconnection of its main oil and gas pipelines, in efforts to bolster the role of gas in the country’s energy mix.

The new company will take over the majority of pipeline infrastructure currently controlled by China National Petroleum Corp (CNPC), Sinopec and CNOOC in addition to an unspecified number of underground natural gas storage and liquefied natural gas terminals.

The formation of the company is said to be part of a national drive intended to “boost competition” by improving the allocation efficiency of the supply of oil and gas resources.

According to consultancy Wood Mackenzie, China’s pipelines, which already run at maximum capacity during peak seasons, are expected to need to handle 2.5 times the current gas demand by 2040.

This comes one week after the Assets Supervision and Administration Commission of the State Council (SASAC) revealed a plan to cut coal production by 25-30 per cent in North-West China.

So far the lack of infrastructure has slowed down the Chinese government’s attempts to swap out coal heating for gas across the north-east region.

According to Wood Mackenzie analyst Max Petrov, the most significant impact of the company’s launch will be to lower gas pricing in the long term.

The company will be overseen by SASAC, which will hold a 40 per cent share of the ownership. The remaining ownership will be controlled by China’s three energy giants, CNPC (30 per cent), Sinopec (20 per cent) and CNOOC (10 per cent).

FURTHER READING: China issues plan to tackle air pollution

FURTHER READING: Russia and China launch joint natural gas pipeline

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