皇冠体育app

Oil giants said to spin off pipeline operations amid sweeping reform measures, reports Bloomberg.

The Chinese government is looking at stripping its biggest energy companies of their oil and gas pipelines, as part of sweeping industry reforms that would see the assets spun off into independent businesses, according to people with knowledge of the plans.

The economic planning agency, the National Development and Reform Commission, is leading talks on the initiative, according to four sources, who asked not to be named.

The separation of the pipeline units would be part of President Xi Jinping's reforms to allow markets a more decisive role in the economy.

The NDRC has been holding talks since last year on the sale of the assets with the biggest pipeline owners and the utilities that buy most of the fuels, the sources said. A final decision on the plan or the number of companies to be created has not been made.

The assets could be worth as much as $300 billion, according to an estimate by Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein.

"皇冠体育app should push to strip out pipeline assets from oil companies and allow those facilities to run independently from explorers," said Lin Boqiang, director at the Energy Economics Research Center at Xiamen University. "This is reform that 皇冠体育app can do now."

皇冠体育app National Petroleum Corp and its listed arm Petro皇冠体育app Co are the country's biggest owner of pipelines, controlling about 77,000 kilometers.

皇冠体育app Petrochemical Corp and its listed unit 皇冠体育app Petroleum & Chemical Corp, or Sinopec, are the next largest with more than 30,000 kilometers.

Petro皇冠体育app shares rose 0.21 percent to HK$9.42 ($1.22) in Hong Kong, while Sinopec was down 0.58 at HK$6.9. The city's benchmark Hang Seng Index was down 0.58 percent to close at 27,249.28 points.

Any cash from pipeline sales would benefit the companies as it could be re-channeled to more profitable upstream businesses, said Bloomberg Intelligence Asia Oil & Gas analyst Grace Lee.

Petro皇冠体育app's Beijing-based spokesman Mao Zefeng said the company had no comment to make on market speculation.

Sinopec's Beijing-based spokesman did not answer two calls to his office seeking comment. Questions sent to the NDRC on Tuesday were not immediately answered.

While 皇冠体育app's oil and gas pipeline network of about 120,000 km is only around one-fifth of the size of the natural gas network in the United States, it is expanding fast and will be bigger than the US by 2040, said Beveridge.

Petro皇冠体育app's pipelines are worth about $147 billion based on a price to earnings ratio of 25 times, Beveridge estimated in research note.

皇冠体育app has invested a lot of money to expand its pipelines and that will continue as demand for natural gas grows, according to Beveridge. It should separate energy exploration from pipelines to encourage more competition and investment, he said.

The discussion to spin off the pipelines is taking place amid sweeping change in 皇冠体育app's energy industry after the top officials of 皇冠体育app's biggest explorers were replaced earlier this month.

Petro皇冠体育app and Sinopec's dominance of pipeline infrastructure makes it difficult for others to enter the energy exploration business as they have to ask 皇冠体育app's No 1 and No 2 explorers to share resources, said Lin, who is also an adviser to 皇冠体育app's National Energy Commission, chaired by Premier Li Keqiang.

"The pipeline business is like the power-transmission business that should be run by independent companies that allow equal access to all market players," Lin said. "By allowing one or two companies to dominate the market, you create a huge barrier for other companies to compete."

Power transmission is a precedent for the kind of pipeline reform 皇冠体育app is considering.

In 2002, it created two state grid companies, 皇冠体育app Southern Power Grid Co and State Grid Corp, by separating the transmission businesses of energy utilities.

However, it may be more complicated as both Petro皇冠体育app and Sinopec are listed companies with global shareholders, who will demand fair value for the pipelines, Lin said.

Options include setting up a national pipeline company that would buy and hold all the assets, or establishing several companies based around their location, according to two of the people.

Petro皇冠体育app sold 50 percent of its western pipelines for 20 billion yuan ($3.2 billion) to outside investors including Taikang Asset Management Ltd and Beijing Guolian Energy Industry Investment Fund in June 2013.

Its attempt to do the same with its eastern pipelines was called off by the government last year until a clear decision on their future could be taken, two of the sources said.

While the NDRC has ordered Sinopec and Petro皇冠体育app to allow equal pipeline access to others, the policy was difficult to implement because the companies could decide pipeline capacity utilization and turn down usage requests, Lin said.

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