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China seeks private

investment in oil and gas

The government’s push for private oil and gas investment may
struggle to gain traction given the current economic climate

COMMENTARY THE Chinese government has reiterated its Petroleum Corp. (CNPC), Sinopec and China
desire to see private sector oil and gas investment National Offshore Oil Corp. (CNOOC) in July.
in the wake of its consolidation of midstream PipeChina paid $56bn for the assets, with the Big
WHAT: infrastructure earlier this year. Three also receiving a stake in the new operator.
China wants to open up The State Council said on September 17 that However, the State-owned Assets Supervi-
oil and gas infrastructure it would promote the opening up of oil and gas sion and Administration Commission (SASAC)
to the private sector. infrastructure to the private sector, Reuters holds the largest stake in the company and has
reported citing state radio. The council added pledged to address all infrastructure capacity
WHY: that the government intended to create a level requests with impartiality.
Private investment in oil playing field for private investors in order to Moreover, the Ministry of Natural Resources
and gas will help boost boost employment. unveiled plans in January to allow foreign and
energy security. The state oil and gas sector has long been a private companies to explore and develop the
major job creator, often sacrificing efficiency in country’s oil and gas reserves without having
WHAT NEXT: order to maintain employee numbers. Beijing to partner with the state majors. At the time,
Poor relations with the US wants the private sector to assume that respon- the ministry said locally registered companies
and the lack of domestic sibility while fostering increased competition in with CNY300mn ($44.4mn) of net assets would
private developers may the energy sector. be allowed to operate independently in the
prove a roadblock. upstream from May 1.
Production preoccupation Not much has been heard since then about
While it was not specified what role the State the government’s efforts on this front, though
Council expects private players to assume, it that is hardly surprising given this year’s coro-
would be a safe bet that Beijing wants greater navirus (COVID-19) pandemic, global reces-
diversity in the upstream. After all, the country sion and oil price collapse. But while global oil
has just consolidated its midstream infrastruc- demand has taken a beating this year, owing to
ture so as to ensure independent developers the various social quarantine measures intro-
are able to secure pipeline capacity for future duced or even reintroduced by governments
discoveries. around the world, the Chinese oil demand
State-owned China Oil & Gas Pipeline recovery appears stronger than first anticipated,
(Pipe-China) took control of the country’s oil according to the trading arm of Sinopec – Asia’s
and gas pipeline network from China National largest refiner.

P8 www. NEWSBASE .com Week 37 17•September•2020