China will launch a new state oil and pipeline group today
China will today launch its National Oil and Gas Pipeline Company.
The long-awaited reform serves as an attempt to keep the country’s energy supply at pace with steadily growing demand. With the hope of streamlining oil production and decreasing reliance on coal power, the new change will see China’s three state-run oil companies merge into one, removing critical barriers to production and transportation. The move is expected to increase industry competition by allowing smaller private or foreign firms to tap into the previously prohibitively expensive supply market.
As President Xi Jinping looks to firm up China’s energy security—it currently imports 70% of its crude oil and 50% of its natural gas—expect increased foreign investment in the midstream sector to grow the country’s energy transportation capabilities. Greater midstream investment and competition will allow the Chinese state-owned company to focus on exploration and extraction in the medium to long term. However, the technology needed for large-scale exploration and extraction is incredibly costly. As such, the new company is likely to garner additional funding by listing shares publicly within the next three years.
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