China's CNPC to Split Natural Gas Sales Arm from Transportation Business

Source: Reuters 11/30/2016, Location: Asia

Chinese energy giant China National Petroleum Corp (CNPC) will separate its natural gas sales and transportation arms, the company's official newspaper said on Monday, part of government-directed sector reforms and a move that paves the way for further industry restructuring.

A stand-alone gas transportation business under CNPC, which supplies nearly 80 percent of the country's gas market, will provide for greater third-party access to the country's gas grids, industry observers have said. Beijing wants to lift use of the cleaner-burning fuel and cut down on dirtier coal.

"This is a major step in executing central government's strategy, and meets the urgent needs of establishing a competitive natural gas market domestically," company publication China Petroleum News cited Xu Wenrong, vice president of CNPC, as saying.

Beijing wants gas to supply about 15 percent of its total energy needs by 2030, up from just 6 percent presently.

The government has over the past month or so taken sweeping measures to encourage investment in gas infrastructures and make the cost of transportation more transparent.

Under the current plan, CNPC will set up a separate gas sales subsidiary, which will oversee five regional branches, CNPC's official newspaper said.

"The previous model that bundles sales and transportation together lacks transparency. By separating the pipeline transportation, it will allow other gas-producing companies to use the CNPC-invested gas grids," a company official told Reuters. The official asked not to be identified as he was not authorised to speak to the media.

The latest reform step comes after CNPC restructured a range of non-core assets amid low crude prices and Beijing's urging that the state-owned conglomerate be slimmed down. The company spun off $11 billion in financial assets, and sold $3.8 billion of engineering assets to a listed unit.

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