PetroChina will merge its wholesale natural gas sales unit with retail provider Kunlun Energy to shore up profits though the move worries independent gas sellers that fear the combination will create a monopoly.PetroChina announced the restructuring internally last week to merge PetroChina Natural Gas Sales Company, the country’s largest natural gas wholesaler, with Kunlun Energy Co Ltd, said three sources with direct knowledge of the matter. The three sources declined to be named as they are not authorised to speak to the media. A spokesman with China National Petroleum Corp, parent of PetroChina, said he could not immediately confirm the restructuring.
Hong Kong-listed Kunlun operates Petrochina’s liquefied natural gas (LNG) receiving terminals and distributes gas to households and factories.PetroChina Natural Gas Sales Company markets the state-owned company’s domestic gas production, imports of pipeline gas from Turkmenistan and Myanmar, and LNG shipped in from Qatar and Australia.But the firm, which supplies 70% of China’s gas, has suffered losses in its import business as the global prices it pays are often above state regulated domestic prices. In the first nine months of 2018, PetroChina booked a net loss of nearly 20bn yuan ($2.88bn) on gas imports compared with net losses of 16.99bn yuan during the same period a year earlier.Kunlun during the first six months of 2018 reported net profit of 5.04bn yuan, up 1.4% from the same period a year earlier, according to its financial report.
“This shall boost PetroChina’s lagging gas retail business and cut heavy losses at the wholesale department,” said one of the three executives. On November 6, Kunlun released a statement to the Hong Kong Stock Exchange discussing “Natural Gas Business Development Strategies” that states PetroChina’s wholesale and retail sales businesses will be operated independently. The statement adds that as of the date of the announcement Kunlun has no intention to transfer any PetroChina assets in connection with the strategy. Kunlun did not immediately respond to an email requesting comment on the restructuring sent after business hours. Still, the restructuring worries smaller independent firms such as China Resources Gas Group, China Gas Holdings and ENN Energy Holdings that are fearful the move could squeeze supplies in a fast growing market and create a monopoly wholesaler.
“(It will) dramatically alter the market structure as PetroChina will no doubt prioritise Kunlun as its top customer at the expense of other buyers,” said another of the executives, who is with an independent gas distributor.The move is Petrochina’s response to a government plan to create a national gas pipeline company by consolidating the country’s trunk pipeline assets of which PetroChina controls nearly 80%. “The integration means Kunlun will receive support from the supply side, and vice versa the sales group will have a deeper penetration into the retail including city gas distribution, gas refilling stations,” said the third source. Nearly 30 provincial wholesale operations of the gas sales company will be merged with the similar number of provincial outlets under Kunlun, the sources said.
Sources and photo-credits: Gulf Times