LONDON (ICIS)--The establishment of PipeChina as the country’s single midstream operator of key oil and gas infrastructure was grounded in the idea that improved third party access (TPA) would give a much-needed boost to competition and therefore energy security.
Even before it formally took control of key LNG terminals, gas pipes and storage units at the start of October, the new company was championing transparency and centralised platforms as means to allowing new entrants access to the market.
At that time, few would have expected real signs of such plans to materialise quite so soon.
Yet from November, TPA on spare capacity is available. In some instances, the sub-letting of capacity was already in practice by the previous infrastructure owners, but this should not detract from the impressive speed at which PipeChina has rolled out a common booking platform and instigated shipper registration.
Of course, more still needs to be done.
While visibility of upcoming spare capacity will entice some new entrants to the market as well encourage those second-tier energy companies already active to trade more, further transparency is needed.
The European gas model shows that with almost real-time information on flows, capacities and storage levels etc, an increasing number of producers, merchants and utilities are prepared to actively engage in the market.
So PipeChina needs to continue to impress as the months pass and surface more data and further reform tariff regimes.
These Chinese reforms are of course not just to the benefit of Chinese market participants. China is the world’s largest importer of gas when the gaseous and liquid forms are aggregated.
It will likely be the outright number one importer of LNG within a matter of years.
So for a global LNG market which is oversupplied these actual structural changes could not come at a better time.
What is more, like the European gas market in the 2010s, the widening gap between oil-indexation and spot pricing should further encourage Chinese gas buyers to book monthly capacities and seek out international sellers who are content to deal a cargo at a time.
Gas hub development is something that is championed by many countries globally, which often cite the experience of Britain’s NBP and the US Henry Hub.
There are many key factors that make a successful hub and many attempts fail.
But while China’s path to hub creation is still in its infancy, early signs are promising, and the timing could not be better.