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Last updated at: (Beijing Time) Wednesday, April 10, 2002

China to Establish Downstream Gas Sector Regulatory Framework

Development of China's downstream gas industry is being hindered by incomplete legislation and a lack of regulation, the national downstream gas sector regulatory framework conference has heard.


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Development of China's downstream gas industry is being hindered by incomplete legislation and a lack of regulation, the national downstream gas sector regulatory framework conference has heard.

Peng Sen, vice-minister of the Economic Restructuring Office of the State Council, said the current law system concerning the gas sector was still incomplete and a modern regulation framework was not in place.

Except for some regulations concerning security, and technology and environmental protection, laws for economic regulation of the downstream gas sector, long distance transmission and urban distribution, for instance, were not comprehensive. This situationwas not conducive to the rapid development of the country's gas market.

China's gas sector was generally characterized by monopoly, and in a more accurate way, it was a co-existence of natural monopoly and administrative monopoly, said Peng.

He noted that China's gas sector would experience a rapid development due to the requirements of economically sustainable development in the coming decade, especially with the start of the"West-to-East Gas Project".

It was rather important to differentiate natural monopoly and non-natural monopoly in the downstream gas sector. For non-naturalmonopoly, measures for deregulation and encouraging competition should result in a fair competitive market. As for natural monopoly, government regulations should be introduced with the aimof protecting consumers' interests.

A regulatory commission would be established to take charge of regulating the downstream gas sector. The main duties of the commission included approving projects, approving terms of access,regulating prices, regulating quality of service and dealing with regulators in adjacent countries regarding cross-border pipelines.

Experts from the World Bank outlined internationally successful experiences in the sector, requiring that the regulatory system should be transparent and accountable.

At present, the proportion of natural gas consumption in China's primary energy consumption structure is just three percent, much lower than the world average of 24 percent and Asia's average of 8.8 percent. It is expected that by 2005 the proportion will climb to five percent, about 60-70 billion cubic meters. By that time, national natural gas output will reach 50 billion cubic meters and 140,000 kilometers of gas pipelines will be in operation.

The project of a regulatory framework for China's downstream gas sector is a joint one, which since 1999 has been conducted by the World Bank and Economic Restructuring Office of the State Council.


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