【SCI View】COGPC, China's Fourth NOC to Sail Off

SCI99

2019-12-09

COGPC, China's Fourth NOC to Sail Off

China Oil and Gas Piping Network Corporation (COGPC), formerly called as National Pipeline Corporation, officially sailed off since December 9, 2019. The new leading team cut the ribbon in Beijing’s headquarter, overseen by Vice Premier Han Zheng. Former CNPC Group General Manager Zhang Wei was nominated as the President of COGPC, and former PetroChina President Hou Qijun was nominated as the General Manager.

According to the latest update, the main frame of the new giant remained the same from previous market speculations, but several details were still unsettled, leaving great uncertainty to the future forming of the company, in particular, the asset consolidation and optimization. Currently, the corporate was comprised by headquarter and four main departments at HQ, and three business divisions, namely crude oil division, natural gas division and refined oil division, and the shareholder structure finalized at SASAC 40%, CNPC 30%, Sinopec 20%, CNOOC 10%.

For the three business divisions, the company gathered a batch of sub companies from CNPC, Sinopec and CNOOC. The crude oil division was comprised by Sinopec Pipeline and Storage Company, PetroChina Western Pipeline Company, PetroChina Southwest Pipeline Company, and the crude oil part of PetroChina Pipeline Company. The natural gas division was comprised by PetroChina Beijing Natural Gas Pipeline Company, PetroChina WEP Company, CNOOC Natural Gas Pipeline Company, Sinopec Natural Gas Company, and the natural gas parts of PetroChina Western Pipeline Company, PetroChina Southwest Pipeline Company and PetroChina Pipeline Company. The refined oil division was comprised by parts of Sinopec and CNOOC’s refined oil companies, and refined oil part of PetroChina Western Pipeline Company, PetroChina Southwest Pipeline Company and PetroChina Pipeline Company.

The formal establishment of COGPC is with no doubt another significance and milestone of China’s natural gas sector at the end of 2019, together with the kick-off of China-Russia East Pipeline on December 2. Aiming to achieve four purposes under the principle of natural gas industry reform “hold the midstream and open-up the upstream and downstream”, COGPC is designed to promote competition so to increase supply, to ensure a fair and open market so to increase efficiency, to attract investment, to accelerate infrastructure construction, and to hold midstream in hand while open up upstream and downstream so to push the marketization reform forward.

Whatsoever, the struggle on asset continues, with or without the ceremony, and this is believed to be the main theme of COGPC daily running in the next one or two years. On the one hand, CNPC is still resisting the 500b CNY level asset transfer regarding the pipeline ownership, as 25b CNY annual profit cut off is hard to accept by shareholders. On the other hand, CNOOC is also trying to release some long-term burdens, the best if all of them, but reluctant to give up their terminals, especially lucrative ones in the north. For instance, COGPC planned to leave three terminals to CNOOC, and one of each to CNPC and Sinopec. CNOOC right now is evaluating to keep Ningbo Terminal or Tianjin Terminal to make a pack with Putian Terminal and Dapeng Terminal, and CNPC and Sinopec also have their own favourite ones but definitely more than two for each. Sinopec planned to give up Wen-23 and Wen-96 to earn one more terminal quota to the list. In general, considering the regional market influence, matched pipelines and long-term contracts, and profitability essentially, the procedure is expected to be arduous.

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