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Private companies eager to explore previously restricted sectors

Publication Date : 17-07-2012

 

Following the unveiling of a string of policies by the central government to encourage the opening of monopolised sectors to private investment, some private enterprises have decided to test the waters.

Guanghui Energy Co Ltd, a privately held natural gas pipeline operator based in the Xinjiang Uygur autonomous region, said that it had applied for a crude oil import license, an area which is currently strictly controlled by several State-owned enterprises.

"We sent the application to the top authorities quite a while ago, but have yet to receive any feedback," said Wang Yuqin, board secretary of Shanghai-listed Guanghui Energy.

The Xinjiang government has set up a coordination team to communicate with the National Energy Administration and China National United Oil Corp on licensing issues, China Securities Journal reported last week.

If successful, Guanghui Energy will become the first private company to have such a qualification, another breakthrough for the company after it got the green light to build a cross-border natural gas pipeline connecting Kazakhstan and Xinjiang in June last year, the first private investment in such a project.

Since May, ministries including the Ministry of Land and Resources, the Ministry of Transport, and the Ministry of Railways have announced a slew of detailed policies to materialise the "New 36 Rules" released in 2010 on private investment in State-monopolised sectors including natural resources, energy, railway construction, banking and public utilities.

The government has decided to open these monopolised sectors to private capital, but it still remains to be seen whether these measures can take effect, said Shang Jiqiang, chairman of Guanghui Energy.

The company purchased a 49 per cent stake in Kazakhstan-based Tarbagatay Munay LLP in 2009 to develop an 8,300-square-kilometre oil and gas block in eastern Kazakhstan. Guanghui also gained 50 per cent of TMB's management rights.

But the company has to import the oil and gas produced in the Central Asian country to China via China National United Oil, which is responsible for the crude oil import and export operations of China National Petroleum Corp, the country's biggest energy conglomerate, as Guanghui lacks an oil import license.

"Without the crude oil import license, we have to set our production volume based on China National United Oil's import quota. It's intolerable for us," Shang said.

Although the central government has encouraged private companies to import petroleum, no private company has so far managed to fully tap into the oil and gas sector, he added.

"It remains difficult to anticipate whether the government will approve Guanghui's application, but the timing is quite in tune with the government's recent move to open the oil and gas market to the private sector," said Lu Ying, a senior analyst with oil market service provider oilgas.com.cn.

Guanghui Energy remains the only privately owned oil and gas producer in the mainland.

"It's an experimental move for the industry, we'll keep a close watch on how the government responds to the application. It's a complex process that will involve financial and energy regulation," Lu said, adding that the quota, which may be much smaller than State companies', will have little effect on oil prices in the domestic market.

 

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