China mulls ways to allow private investment in energy sector

Beijing is looking at ways to allow private investment in coal and grid power projects

PUBLISHED : Wednesday, 27 November, 2013, 3:32am
UPDATED : Thursday, 28 November, 2013, 4:28pm

The central government is studying ways to allow more private investment in the mainland's energy sector, the National Energy Administration (NEA) said yesterday as part of a wider reform to boost the economy.

The mainland, the world's largest energy consumer, is gradually opening up the industry, but core businesses such as oil and gas exploration are still tightly controlled by state-owned companies.

"NEA is making efforts to remove policy obstacles for private capital to participate in energy development and provide a fair competitive environment for private firms," the administration said on its website.

The government would simplify approvals for coal-fired plants and power grid projects, support private investment in oil and gas exploration and development and set requirements for refineries that can import crude oil, it said.

It would also accelerate rule-making on building and operating gas infrastructure, the agency said, in line with industry expectations that the government is finalising a policy to encourage third-party access to pipeline grids currently dominated by state energy giants.

In a policy draft circulated in August for feedback from industry participants, the government also sought to introduce more transparent accounting of transmission costs in the gas sector, which has bundled transmission and sales together.

Industry sources have said that Beijing is expected to set a high bar for new entrants to the refining sector to obtain the necessary crude oil import quotas.

Refineries would need to have a minimum primary crude distillation capacity of 100,000 barrels per day (bpd), with single units no smaller than 60,000 bpd. It also would require plants to own secondary processing units no smaller than 60,000 bpd and a minimum tertiary processing capacity of 4 million tonnes per year.

The government is widely expected to issue import quotas for around 10 million tonnes of crude to two independent refineries next year, doubling the volume issued to new players in just two years.

The NEA also said it would launch pilot projects on coal deep-processing, new energy and biofuels to entice private investment, without giving further details.