June 19th, 2012 | Global Times New guidelines for energy investment
Guidelines about encouraging private capital to enter the State-dominated energy sector are expected to be released by the end of this month, but experts told the Global Times yesterday there are doubts over whether such a move can provide concrete support for private investors.
The National Energy Administration will unveil a series of detailed guidelines by the end of June, aimed at boosting the involvement of private investors in the domestic energy sector, which has long been dominated by State-owned firms, the China Business News reported yesterday, citing insiders with knowledge of the matter.
According to the report, the areas that will welcome private funds include coal mining, oil and gas exploration, and construction of gas pipelines and power grids.
With the involvement of private capital, China’s energy sector will become “more competitive and more efficient,” and people may pay lower prices for energy products, Song Liang, an analyst at the Distribution Productivity Promotion Center of China Commerce, told the Global Times yesterday.
Still, questions remain. As early as in 2010, the State Council announced that the government would encourage private capital to enter sectors controlled mainly by State-owned companies, including the petroleum and gas sector.
But according to the Ministry of Land and Resources, Sinopec and PetroChina still own the exploration rights to 291 of the country’s mining areas for petroleum and gas, accounting for 89.2 percent of the total. Privately owned companies only have exploration rights to four mining areas, with the rest owned by local governments or other State-owned companies.
“Simply opening up the energy sector is not enough,” Lin Boqiang, director of the Center for Energy Economics Research at Xiamen University, told the Global Times yesterday, noting that some private investors are wary of engaging in the sector, which usually requires massive investment while profits remain uncertain.
Lin also said that since the government controls the pricing of energy products, the returns from engaging in the energy sector remain unpredictable.
“Letting the market set the prices is the top priority for the government, because it is the way to really support private investment in the energy sector,” said Lin.
The competition is still unfair between private and State-owned companies, he said.
Song of the Distribution Productivity Promotion Center echoed Lin’s opinion, and said that there are still “big risks” in the sector for private capital.
Last month, a public debate was spurred by reports about Weiqiao Pioneering Group, a private power company based in Shandong Province.
The group was offering electricity at prices nearly one-third lower than those from State-owned power grid companies.
However, the National Reform and Development Commission, the country’s top economic planner, said the company was violating the national Electricity Law.
By Fang Yunyu