trading, along with arrangements for direct trading between power users and power generation
companies. In 2016, the amount of electricity
traded exceeded 1 million GWh, accounting for
about 19% of China’s total power consumption.
In addition, China established an access and
exiting mechanism for market participants and a
new regulatory system, developed a pilot reform
scheme for power distribution services, and
included coal-fired backup power plants within
the scope of the regulations.
2.9.3 Oil Sector Reform Features
“Comprehensive
Promotion, Major
Breakthroughs and Priority
Trials”
First, a pilot programme was launched to reform
the management of oil and gas mining rights. In
2015, Xinjiang piloted open bidding for the
exploration of conventional oil and gas blocks.
And in October 2016, Xinjiang was identified as
the pilot province for comprehensive energy
reform, with the focus on deregulating market
access to the oil and gas sector.
Second, the reforms deregulating the right to
use imported crude oil and the right to import
crude oil took effect. In 2016, an increasing
number of non-state enterprises were awarded the
necessary permits to import and use crude oil, and
the quota for imported crude oil was increased
significantly. To address issues like quota reselling, China implemented new allocation principles, along with various other adjustments and a
strict assessment regime. This effectively guaranteed the fair allocation of imported crude oil
and maintained sound market development.
Third, overcapacity cutting policies were
extended to the refining and chemical sectors to
improve oil product quality. In 2016, China
introduced several policies—including the
Guidelines on Adjusting the Structure, Promoting the Transformation and Increasing the Profits
of the Petrochemical Industry; and the Development Plan for the Petrochemical and Chemical
Industries, 2016–20—to solve the problem of
production overcapacity in refining and chemicals. Tax incentives were also introduced to
increase oil product exports and reduce domestic
output of oil products. In addition, oil product
quality was further improved—in 2016, 11 provinces in east China supplied China V petrol and
diesel; this was extended across China in 2017.
Fourth, the oil product pricing system was
improved to reflect market developments. In
2016, in the context of sharply falling international crude oil prices and various difficulties
affecting domestic oil and gas production, China
adjusted the oil product pricing system and
lowered the limit for oil product price regulation.
This will mitigate risks that may arise from any
future increase in oil product prices.
Fifth, China accelerated the reform of
state-owned oil enterprises and encouraged the
participation of private capital. In 2016, CNPC
restructured its engineering and construction
businesses, Sinopec restructured its regional oil
engineering services, and CNOOC integrated its
refining and chemical companies. In addition,
state-owned oil enterprises allowed private capital to become stakeholders, thereby creating
mixed ownership businesses. A case in point is
Sinopec, which sold a 50% stake in Sichuan-toEast China Gas Pipeline Co., Ltd.
2.9.4 The Natural Gas Sector Is
Reformed and Achieves
Remarkable Success
First, there was progress in reforming natural gas
pricing into a market-oriented system. In 2015,
China delivered the goals of the three-step transition in natural gas pricing reform. In 2016,
China took natural gas pricing reform even further by identifying pricing policies for gas storage facilities, promoting market-oriented natural
gas pricing for chemical fertilisers, and by
piloting reform of the city-gate gas price in
Fujian. The price of non-residential gas, which
accounts for more than 80% of China’s total
natural gas consumption, was almost all
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S. Yaodong and A. Gillespie
companies. In 2016, the amount of electricity
traded exceeded 1 million GWh, accounting for
about 19% of China’s total power consumption.
In addition, China established an access and
exiting mechanism for market participants and a
new regulatory system, developed a pilot reform
scheme for power distribution services, and
included coal-fired backup power plants within
the scope of the regulations.
2.9.3 Oil Sector Reform Features
“Comprehensive
Promotion, Major
Breakthroughs and Priority
Trials”
First, a pilot programme was launched to reform
the management of oil and gas mining rights. In
2015, Xinjiang piloted open bidding for the
exploration of conventional oil and gas blocks.
And in October 2016, Xinjiang was identified as
the pilot province for comprehensive energy
reform, with the focus on deregulating market
access to the oil and gas sector.
Second, the reforms deregulating the right to
use imported crude oil and the right to import
crude oil took effect. In 2016, an increasing
number of non-state enterprises were awarded the
necessary permits to import and use crude oil, and
the quota for imported crude oil was increased
significantly. To address issues like quota reselling, China implemented new allocation principles, along with various other adjustments and a
strict assessment regime. This effectively guaranteed the fair allocation of imported crude oil
and maintained sound market development.
Third, overcapacity cutting policies were
extended to the refining and chemical sectors to
improve oil product quality. In 2016, China
introduced several policies—including the
Guidelines on Adjusting the Structure, Promoting the Transformation and Increasing the Profits
of the Petrochemical Industry; and the Development Plan for the Petrochemical and Chemical
Industries, 2016–20—to solve the problem of
production overcapacity in refining and chemicals. Tax incentives were also introduced to
increase oil product exports and reduce domestic
output of oil products. In addition, oil product
quality was further improved—in 2016, 11 provinces in east China supplied China V petrol and
diesel; this was extended across China in 2017.
Fourth, the oil product pricing system was
improved to reflect market developments. In
2016, in the context of sharply falling international crude oil prices and various difficulties
affecting domestic oil and gas production, China
adjusted the oil product pricing system and
lowered the limit for oil product price regulation.
This will mitigate risks that may arise from any
future increase in oil product prices.
Fifth, China accelerated the reform of
state-owned oil enterprises and encouraged the
participation of private capital. In 2016, CNPC
restructured its engineering and construction
businesses, Sinopec restructured its regional oil
engineering services, and CNOOC integrated its
refining and chemical companies. In addition,
state-owned oil enterprises allowed private capital to become stakeholders, thereby creating
mixed ownership businesses. A case in point is
Sinopec, which sold a 50% stake in Sichuan-toEast China Gas Pipeline Co., Ltd.
2.9.4 The Natural Gas Sector Is
Reformed and Achieves
Remarkable Success
First, there was progress in reforming natural gas
pricing into a market-oriented system. In 2015,
China delivered the goals of the three-step transition in natural gas pricing reform. In 2016,
China took natural gas pricing reform even further by identifying pricing policies for gas storage facilities, promoting market-oriented natural
gas pricing for chemical fertilisers, and by
piloting reform of the city-gate gas price in
Fujian. The price of non-residential gas, which
accounts for more than 80% of China’s total
natural gas consumption, was almost all
422
S. Yaodong and A. Gillespie