China welcomes private oil-gas investment

Domination of the Chinese oil and gas business by state-owned companies will be weakened under reforms announced by the State Council (cabinet).

Domination of the Chinese oil and gas business by state-owned companies will be weakened under reforms announced by the State Council (cabinet).

The sketchily described reforms would allow participation in oil and gas development by “eligible enterprises.”

According to Xinhua, the official news agency, “The prime goal of mixed-ownership reform is to create a flexible and efficient market-oriented mechanism with the incorporation of private shareholders to improve the management of state-owned companies.”

The government now restricts exploration and development rights largely to China National Petroleum Corp., China Petrochemical Corp. (Sinopec), China National Offshore Oil Corp., and Shaanxi Yanchang Petroleum Co. Ltd.

Xinhua said the reform plan calls for “reshuffling of the oil and gas industry based on work specialization.” Engineering companies and oil and gas equipment manufacturers, for example, will be encouraged to work as independent enterprises, it said.

State-owned oil and gas companies, according to the plan, should “keep fit to stay healthy” and cease running social services.

The reform plan encourages natural gas companies to separate gas sales from pipeline transportation and allows private investment in oil and gas storage facilities.

It will move toward market pricing of some oil products but allow the government to intervene in “abnormal” price fluctuations.

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