Gas pipe­line firms di­ver­sify own­er­ship

Lat­est moves could be pre­lude to pri­vate cap­i­tal en­ter­ing the in­dus­try

China Daily (Hong Kong) - - BUSINESS | MARKETS - By YANG ZIMAN yangz­i­man@chi­

China Pe­tro­leum & Chem­i­cal Corp, usu­ally known as Sinopec, has sold half of the shares of its gas pipe­line busi­ness to an­other two Sta­te­owned en­ter­prises. This is seen as a move to di­ver­sify the share own­er­ship of the oil and gas in­dus­try, that has been strictly con­trolled by Sta­te­owned en­ter­prises.

Ac­cord­ing to the state­ment by Sinopec on Mon­day, China Life, the largest State-owned in­sur­ance com­pany in China by rev­enue, will pay 20 bil­lion yuan ($2.9 bil­lion) for a 43.86 per­cent stake in the pipe­line.

State De­vel­op­ment & In­vest­ment Corp (SDIC), a Sta­te­owned in­vest­ment hold­ing com­pany with its main in­vest­ments in in­fra­struc­ture-re­lated busi­ness, will get the re­main­ing 6.14 per­cent for 2.8 bil­lion yuan.

The reg­is­tered cap­i­tal of the pipe­line com­pany will in­crease from 100 mil­lion to 200 mil­lion yuan.

Sinopec, one of China’s top three en­ergy com­pa­nies, will use the funds to ex­pand the ca­pac­ity of the pipe­line unit, Sinopec Sichuan-to-East China Gas Pipe­line Co, build gas-stor­age fa­cil­i­ties and push for­ward its nat­u­ral gas busi­ness, ac­cord­ing to the state­ment.

Liu Guang­bin, an oil and gas an­a­lyst with Shan­dong-based bulk com­mod­ity in­for­ma­tion com­pany Sublime China In­for­ma­tion Group Co Ltd, said that although the share trans­fer is still be­tween the State-owned en­ter­prises, it has set an ex­am­ple for pri­vate cap­i­tal to en­ter the highly mo­nop­o­lized in­dus­try.

“This is the first time for the gas pipe­line sec­tor of Sinopec to in­tro­duce out­side cap­i­tal. It can be ex­pected that so­cial funds will be at­tracted to the sec­tor to pro­vide solid cap­i­tal for gas in­fra­struc­ture con­struc­tion,” said Liu.

Liu added that the gas pipe­line sec­tor has rel­a­tively sta­ble prof­itabil­ity and low risks, mak­ing it a good place to start for mixed own­er­ship of the oil and gas in­dus­try. More­over, the sec­tor has been a good profit gen­er­a­tor, as shown in the earn­ings re­port of the top three oil and gas com­pa­nies in re­cent years.

“China Na­tional Pe­tro­leum Cor­po­ra­tion has gone fur­ther in cap­i­tal di­ver­si­fi­ca­tion. It has al­ready in­tro­duced the so­cial se­cu­rity fund and pri­vate cap­i­tal to its gas pipe­line sec­tor,” said Liu.

In 2014, the Na­tional En­ergy Ad­min­is­tra­tion is­sued a trial reg­u­la­tion on gas pipe­lines in re­sponse to the mar­ket’s calling for pri­vate cap­i­tal to en­ter the sec­tor.

the amount of money that China Life will pay for a 43.86 per­cent stake in Sinopec’s gas pipe­line busi­ness


Em­ploy­ees of China Pe­tro­leum & Chem­i­cal Corp check nat­u­ral gas pipe­lines in Puyang, He­nan prov­ince.

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