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Tom Kirkman

China sets up national oil, gas pipe firm in drive to 'boost competition'

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To "Boost Competition"?  In China?


Someone in China is going to get really rich.

Boosting Competition in China might be a good title for a follow up album by Axl Rose, after his last flop album Chinese Democracy.

It would be exceedingly amusing to me if a certain human handler of a certain AI bot was somehow connected to this new National Oil & Gas pipeline firm in China (it would certainly explain its persistence here) but that type of tin foil speculation is too far of a reach even for me.


Anyway, back on topic, I generally support an increase in oil & gas pipeline infrastructure anywhere in the wirld, regardless of the politics involved.  Pipelines remain by far the safest way to transport oil over long distances.

And if you notice, an increase in oil & gas pipeline infrastructure tends to increase economic activity in the region.  Much in the same way that building railroad tracks 150 years ago tended to increase economic activity in the regions where the railroad tracks were built.


Unsurprisingly, an "unidentified official" and an "unidentified industry insider" were sources of this news from China.


China sets up national oil, gas pipe firm in drive to 'boost competition' - Xinhua

BEIJING (Reuters) - China announced on Monday the establishment of a national oil and gas pipeline company in a move intended to boost competition, the Xinhua state news agency said.

The long-awaited state pipeline company aims to provide other investors fair market access to infrastructure that is mainly controlled by China's three national oil companies, Xinhua said.

"The new company will separate (oil and gas) transportation, production and sales, and open (transportation) to third-party entities, which will benefit market competition," said Xinhua, citing an unidentified official at the newly launched pipeline company.

The new entity is expected to manage most of the country's pipeline infrastructure, controlled by energy giants China National Petroleum Corp (CNPC), Sinopec and CNOOC, and some underground natural gas storage, as well as a few liquefied natural gas terminals.

As of end-2018, CNPC owned 63% of China's mainstream oil and gas pipelines, while Sinopec and CNOOC controlled 31% and 6%, respectively.

In a separate report on Monday, Xinhua said the new entity is expected be overseen by the State-owned Assets Supervision and Administration Commission (SASAC), which will have a 40% share in the new entity.


Citing an unidentified industry insider, Xinhua reported the three energy giants will share the remaining ownership, with CNPC holding 30%, Sinopec 20% and CNOOC 10%.


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@Marcin ... you're up  🤣

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It is classic unbundling of generation/extraction and sales from transmission/transport.

Transmission assets are usually concentrated in one company as it is the case of:

-equal access to transmission/transport,

-ease ofcalculation of transmission tariffs,

-ease of planning and optimalization of necessary investment in transmission

-national security

Globally it was conducted first in electricity generation sector and next in gas and oil sectors.

Nothing special. Actually Chinese hydrocarbons markets were really behind in development before this move.

Was there any explanation why the unbundling in this case was done so late ?

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This mechanism of sharing common physical infrastructure is also present in telecom sector. In mobile telephony sharing base stations is both economically efficient and also helps to overcome some technical problems. In remote areas it is cheaper, in dense urban environment, local regulations may prevent building of base stations for all operators, because of impact of radiation of mobile frequences on human health. Furthermore unbundling of mobile infrastructure allows creation of virtual mobile operators that pay fees for usage of infrastructure of major players. It helps to increase competition in this natural monopoly market, otherwise it would create oligopolistic market structure. Cost reasons are especially important in 4G networks, the most expensive ones, due to density of base stations. For fixed telecom networks, also structural fiber networks it works the same.

Another example is usage of railway infrastructure by independent transport providers.

Generally each natural monopoly needs regulation in this way to prevent creation of unnecessary, monopolistic gains, and thus increase competition for the benefit of consumers and generally economy of the country.

If you have any specific questions relating to unbundling please ask.

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