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Research Report

17/07/2019 15:19

Limited impact on NOCs from China's national pipeline plan

[ET Net News Agency, 17 July 2019] Moody's Investors Service said in a just-released
report that the Chinese government's plan to create a national pipeline company - which
will acquire most of the oil and gas pipelines from the country's three national oil
companies (NOCs) - will have a limited impact on the NOCs' credit profiles.
"The impact of the acquisition on the NOCs will be limited because we estimate that
their pipelines account for only a small portion of their total assets and revenue," said
Kai Hu, a Moody's Senior Vice President.
"CNPC will be most affected, but even then, only to a limited degree," added Hu.
Moody's explains that China National Petroleum Corporation (CNPC, A1 stable) owns most
of the long-distance pipelines in China by distance, including about 75% of the country's
natural gas pipelines. Nevertheless, given CNPC's diversified operations, Moody's
estimates that CNPC's natural gas pipelines account for just a single-digit percentage of
the company's total assets and revenue.
However, Moody's pointed out that the loss of EBITDA and debt associated with the
pipelines will likely cause CNPC's leverage to rise slightly.
The impact of the acquisition on the other two companies - China National Offshore Oil
Corporation (CNOOC, A1 stable)(00883) and China Petrochemical Corporation (Sinopec, A1
stable)(00386) - will be even smaller.
Moody's also said that the three companies will remain strategically important to
China's energy security and will therefore continue to receive government support in times
of need.
Moody's further explained that the government's plan to acquire the pipelines through a
newly created independent pipeline company will increase the operational efficiency of and
public access to China's national pipelines, and attract investment from the private
Increased investment that expands the country's natural gas pipeline network, combined
with China's clean energy initiatives, have the potential to boost the country's natural
gas consumption; thereby potentially benefitting the NOCs. (KL)

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