China may cajole its largest state-owned energy companies to spin-off their oil and gas pipelines into independent businesses, according to people with knowledge of the plans, reported Bloomberg.
Separating the pipeline units would be part of the sweeping industry reforms President Xi Jinping seeks to make in order to allow markets to have a more decisive role in the economy.
Currently, China National Petroleum, and its listed arm PetroChina, control about 77,000 kilometers (48,000 miles) of pipelines, making it the country’s biggest owner of pipelines. The next largest is China Petrochemical and its listed unit China Petroleum & Chemical, better known as Sinopec, with more than 30,000 kilometers.
The National Development and Reform Commission, China’s economic planning agency, is leading talks on the initiative, according to four people, who asked not to be named as they aren’t authorized to speak publicly on the issue, said Bloomberg.
Since last year, the NDRC has discussed the sale of the assets with the biggest pipeline owners and the utilities that buy most of the fuels, the people said. So far, nothing has been finalized. However, the assets could be worth as much as $300 billion, according to Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein.
If this actually happens it will be a big deal, both economically and psychologically. Already, China wants to make the building of gas and oil pipeline infrastructure a big focus of the New Silk Road initiative because it plans to feed its economy using natural gas and oil from Central Asia and Russia.
It will also give the markets a bigger say in how the Chinese economy moves forward. Specifically, on the Hong Kong stock exchange, the shares prices of the state-owned enterprises will benefit from the proceeds of these sales. It may also lead Beijing to allow these spin-offs to list and trade in Hong Kong or other exchanges, which would create more big initial public offerings.
PetroChina had no comment and Sinopec’s Beijing-based spokesman didn’t respond to Bloomberg.
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