PetroChina's gas marketing consolidation worries independent sellers - sources

Kunlun Energy

15/11/2018 23:00

(Repeats earlier story for wider readership with no change to
text)
    By Chen Aizhu
    BEIJING, Nov 15 (Reuters) - PetroChina  0857.HK  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
 0135.HK , said three sources with direct knowledge of the
matter.
    The three sources declined to be named as they are not
authorized 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 percent 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 20 billion yuan ($2.88 billion) on gas imports
compared with net losses of 16.99 billion yuan during the same
period a year earlier.  urn:newsml:reuters.com:*:nL3N1XA278
    Kunlun during the first six months of 2018 reported net
profit of 5.04 billion yuan, up 1.4 percent 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 Nov. 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.  urn:newsml:reuters.com:*:nHKS1ZjTq1
    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  1193.HK , China Gas Holdings
 0384.HK  and ENN Energy Holdings  2688.HK  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 prioritize 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 percent.  urn:newsml:reuters.com:*:nL4N1M723X
    "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.

($1 = 6.9329 Chinese yuan renminbi)

 (Reporting by Chen Aizhu; Editing by Christian Schmollinger)
 ((aizhu.chen@thomsonreuters.com; +8610 66271211; Reuters
Messaging: aizhu.chen.reuters.com@reuters.net))