Sinopec to Raise Capital by Selling Half of Chinese Natural-Gas Pipeline

 The Sichuan-to-East China pipeline, which began operations in 2010, has a designed annual capacity of 12 billion cubic meters a year. Sinopec has said its total investment in the pipeline project was around 62.7 billion yuan ($9.5 billion).

This latest announcement by Sinopec comes after rival PetroChina Co. recently said it would restructure pipeline assets and sell stakes in the pipelines. It also comes ahead of expected government reforms that could weaken the hold of state-owned energy giants over the country’s oil-and-gas infrastructure.

Such reforms could enhance third-party access to China’s pipelines, which in turn could help encourage more exploration and development of potentially abundant but expensive-to-tap gas reserves in central and southwest China by independent Chinese producers.

State-owned energy companies grew bloated in recent years and once wielded tremendous political power in China. Lately, they have been targets of reform under President Xi Jinping, though some industry officials say progress has been slow partly because of resistance from the companies.

The Sinopec capital injection could also help get pipelines get built more quickly, as Beijing pushes to bring more private capital into the public sector. The environmental benefits of more widespread natural-gas use in industry makes the sector a priority for economic planners in Beijing.

The government wants to boost natural gas consumption and production to cut its reliance on heavily polluting coal. However, a pipeline grid that is far less developed than in the U.S. creates difficulties in getting gas to potential consumers.

Yet success depends upon boosting Chinese gas demand over the long run. And a weakened economy has helped crimp the country’s gas demand, which grew just 3.3% last year, according to government data, compared with double-digit growth in recent years.