26 September 2018

Big Oil unlikely to open up pipeline sector without a fight

Although Beijing has yet to decide whether to divest the state-owned oil giants of their pipeline assets, it is clearly determined to break the monopoly in the oil and gas distribution market. The National Energy Administration is now soliciting industry views about a proposal to open up the sprawling pipe networks nationwide.

According to a draft of the far-reaching reform, oil and gas resources of third parties will be allowed to go through the main pipelines owned by PetroChina (00857.HK), Sinopec (00386.HK) and CNOOC (00883.HK) in a fair manner whenever the three oil giants have surplus capacity.

Theoretically, the proposed move not only will help draw new players into the market but also will prompt interconnection between the independent pipe networks of the big three, China Business News reported.

But in practice, PetroChina, which controls about 70 percent of the nation’s pipeline assets, is unlikely to give up its turf easily and open up its strategic assets to competitors. The definition of “surplus capacity” and monitoring of this variable, for example, could leave ample room for PetroChina to play around the rules and put up barriers to new entrants.

– Contact the writer at [email protected]




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