is still in its early stages. The level of marketisation varies for different energy sources—the
coal sector has completed its market-oriented
reform; the downstream oil and gas sector is
highly deregulated, but upstream still suffers
from severe monopoly problems; and the
market-oriented reform of power transmission,
distribution and retail is urgently needed. In
addition, the institutional barrier in natural
monopolies has become a major hurdle in the
reform of the energy circulation system.
(1) Slightly more competition in the oil and
gas market, but resource monopoly
remains
As a result of the 1998 reform and restructuring
of the oil and gas sector, and the related reform
and policy measures that followed, an energy
production and circulation system has taken
shape, covering upstream and downstream,
domestic and overseas trading, and production,
transmission and sales. The market consists of
the top four oil groups—China National Petroleum Corporation (CNPC), China Petroleum &
Chemical Corporation (Sinopec), China National
Offshore Oil Corporation (CNOOC) and Yanchang Petroleum—alongside various other oil
and gas enterprises of different ownership types
and sizes, with the top four dominating and
forming in effect an oligopolistic or monopolistic
competition landscape.
Competition in refining and chemicals,
wholesale and retail, has increased. In recent
years, state-owned oil enterprises such as
CNOOC and Sinochem, which have crude oil
resources, have rapidly enlarged their refining
presence,
intensifying
the
competition.
Because CNOOC and Sinochem have limited
downstream distribution resources, the construction and operation of refineries backed by
CNOOC and Sinochem investment will increase
competition in the energy wholesale and retail
sectors.
At the same time, easier entry terms into
wholesale oil products have helped diversify
market participants. CNOOC, Sinochem and
some private oil and gas companies have all been
awarded an oil product wholesale licence.
Compared with the early 21st century, the competition landscape of the wholesale oil product
market has evolved, and competition has gradually intensified.
CNPC, Sinopec and CNOOC have retained
their resource monopoly, restricting the development of other market players. In terms of
market structure, domestic crude oil and gas
resources are concentrated in state-owned oil
enterprises, especially CNPC and CNOOC.
Wholesale is dominated by CNPC, Sinopec and
CNOOC, but in recent years competition in
refining, oil production and natural gas wholesale
markets has intensified somewhat. There are
numerous players in the energy retail market, but
because the resource market is dominated by
CNPC, Sinopec and CNOOC, private companies
dealing in oil products and natural gas other than
the top four oil groups do not have a complete
vertical presence throughout the market, and they
rely on the top four oil groups for resources and
even marketing.
(2) Electricity market reform has started and
needs to be deepened
China’s electricity market has more than a decade of experience, during which time small
reforms in different parts of the electricity value
chain have been continuously carried out and
have delivered good results. In 2002, China
separated generation from the power grid, and
gradually developed pricing mechanisms in
power generation, transmission, distribution and
sales. In 2004, China introduced the benchmark
feed-in tariff policy and began to set and
announce regularly the feed-in tariff for new
generating units in each province.
The main problems in China’s electricity sector are reflected in its market structure. In power
generation a pattern of diversified competition
has taken shape. The vast majority of power
generation enterprises are state-owned and
state-controlled, including the top five large
power generation corporations (China Huaneng,
China Datang, China Huadian, China Guodian
and State Power Investment Corporation, SPIC)
Special Report 4: China’s Energy System Revolution
435
coal sector has completed its market-oriented
reform; the downstream oil and gas sector is
highly deregulated, but upstream still suffers
from severe monopoly problems; and the
market-oriented reform of power transmission,
distribution and retail is urgently needed. In
addition, the institutional barrier in natural
monopolies has become a major hurdle in the
reform of the energy circulation system.
(1) Slightly more competition in the oil and
gas market, but resource monopoly
remains
As a result of the 1998 reform and restructuring
of the oil and gas sector, and the related reform
and policy measures that followed, an energy
production and circulation system has taken
shape, covering upstream and downstream,
domestic and overseas trading, and production,
transmission and sales. The market consists of
the top four oil groups—China National Petroleum Corporation (CNPC), China Petroleum &
Chemical Corporation (Sinopec), China National
Offshore Oil Corporation (CNOOC) and Yanchang Petroleum—alongside various other oil
and gas enterprises of different ownership types
and sizes, with the top four dominating and
forming in effect an oligopolistic or monopolistic
competition landscape.
Competition in refining and chemicals,
wholesale and retail, has increased. In recent
years, state-owned oil enterprises such as
CNOOC and Sinochem, which have crude oil
resources, have rapidly enlarged their refining
presence,
intensifying
the
competition.
Because CNOOC and Sinochem have limited
downstream distribution resources, the construction and operation of refineries backed by
CNOOC and Sinochem investment will increase
competition in the energy wholesale and retail
sectors.
At the same time, easier entry terms into
wholesale oil products have helped diversify
market participants. CNOOC, Sinochem and
some private oil and gas companies have all been
awarded an oil product wholesale licence.
Compared with the early 21st century, the competition landscape of the wholesale oil product
market has evolved, and competition has gradually intensified.
CNPC, Sinopec and CNOOC have retained
their resource monopoly, restricting the development of other market players. In terms of
market structure, domestic crude oil and gas
resources are concentrated in state-owned oil
enterprises, especially CNPC and CNOOC.
Wholesale is dominated by CNPC, Sinopec and
CNOOC, but in recent years competition in
refining, oil production and natural gas wholesale
markets has intensified somewhat. There are
numerous players in the energy retail market, but
because the resource market is dominated by
CNPC, Sinopec and CNOOC, private companies
dealing in oil products and natural gas other than
the top four oil groups do not have a complete
vertical presence throughout the market, and they
rely on the top four oil groups for resources and
even marketing.
(2) Electricity market reform has started and
needs to be deepened
China’s electricity market has more than a decade of experience, during which time small
reforms in different parts of the electricity value
chain have been continuously carried out and
have delivered good results. In 2002, China
separated generation from the power grid, and
gradually developed pricing mechanisms in
power generation, transmission, distribution and
sales. In 2004, China introduced the benchmark
feed-in tariff policy and began to set and
announce regularly the feed-in tariff for new
generating units in each province.
The main problems in China’s electricity sector are reflected in its market structure. In power
generation a pattern of diversified competition
has taken shape. The vast majority of power
generation enterprises are state-owned and
state-controlled, including the top five large
power generation corporations (China Huaneng,
China Datang, China Huadian, China Guodian
and State Power Investment Corporation, SPIC)
Special Report 4: China’s Energy System Revolution
435