[ET Net News Agency, 22 December 2017] China's Oil and Gas Reform is expected to drive
the growth of the natural gas market, support local oil companies in their overseas
investment, and boost the industry's production and corporate efficiency through adopting
smart technology and modern business structures, according to the latest report from
Deloitte.
This is the first report as part of the insight series from Deloitte, which aims to
review the impact of China's Oil and Gas Reform, and to study emerging industry trends
such as reduced commodity prices, rising environmental concerns and the widespread
adoption of smart technology.
According to the report, China's Oil and Gas Reform will focus on pushing
market-oriented transformation, covering different aspects of the value chain: exploration
and exploitation, import and export management, pipeline reform, downstream competition,
pricing mechanism, state-owned enterprise (SOE) reform, storage, and environment and
safety.
Deloitte China Oil & Gas Sector Managing Partner, Christopher Roberge said, "the reform
is going to have a significant impact on this strategic sector in China. An example of
this is the transformation that will be required to propel the growth of the natural gas
market - a more affordable and environmental friendly energy source." He added that China
plans to increase the proportion of natural gas among all energy sources from 6 percent to
8.3 percent.
Due to the decline in domestic oil production in contrast to the steady growth of energy
demand, the report perceives that the Chinese government will remain supportive to
overseas investment in oil and gas fields.
This also aligns with the Belt and Road Initiative put forward by the Chinese
government. When it comes to business efficiency, the report cites that oil and gas
exploration and production is one of the most technology-driven industries. China's Oil &
Gas Reform is likely to include measures that promote the adoption of new technologies for
improving supply, productivity and flexibility.
"There are a wide range of benefits from technology adoption that reflect the full
spectrum of the industry; ranging from overcoming geological difficulties during the
drilling process to providing a personalized shopping experience for customers at petrol
stations. Concurrently, Chinese oil and gas companies also need to address the new
challenges brought by this technology revolution in the context of infrastructure, talent
and cyber security," Roberge said.
One of the overarching principles of China's ongoing economic reform is to introduce a
modern corporate system for SOEs, with diversifying the ownership base as one of the key
targets for 2017. The report highlights that the state-owned oil companies CNPC, Sinopec
and CNOOC are expected to see further reorganizations as private investment is encouraged
and these companies focus their efforts to optimize corporate value and maintain a
reasonable debt level.
"As China has entered the new normal of slower economic growth, policymakers and
business leaders will need to manage the prevailing trend of cheaper energy. China's oil
and gas reform will be a gradual process that needs to strike a balance between social and
economic needs," Roberge concluded. (KL)