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By Xie Fang

China's drive to reform its oil and gas pipeline system is set to reach a major milestone this year as the plan for establishing a long-awaited state-owned enterprise (SOE) in charge of the country's natural gas pipelines has recently been approved by the authority, the China Securities Journal reported Sunday.

People familiar with the matter told the China Securities Journal that the new SOE, which is expected to be set up this year, will consolidate the related assets from China's three largest state-owned oil producers and adopt a market-oriented approach to run the country's natural gas pipeline system.

"The separation of natural gas pipelines from oil companies is an inevitable trend," said Lin Boqiang, head of the Xiamen-based China Institute for Studies in Energy Policy. "So far, China's three largest oil companies have all spun off their pipelines, which will be operated by a new SOE."

According to the plan, social capitals will account for about half of the total capital of the new SOE which aims to go public in the future.

Experts believe that the establishment of the new SOE will give China's private enterprises more access to the pipeline building industry, pointing to the fact that most of China's long-distance pipelines for natural gas transportation were built and operated by the China National Petroleum Corporation (CNPC) and the China Petrochemical Corporation (Sinopec Group).

The new SOE is also tasked with strengthening China's capability for building natural gas pipelines, according to experts.

Data shows that the total length of China's natural gas pipelines was 74,000 kms by the end of 2017 with a density of merely 7.3 meters per square kilometer, which is just one-eighth of that of the U.S, one-ninth of France, and one-tenth of German.

"The new SOE is aimed at connecting these pipelines to one another and significantly improving China's pipeline building capacity," said Zhou Lisha, fellow researcher of the China Enterprise Reform and Development Society (CERDS).

The Chinese government came up with the idea of separating oil and gas pipelines from oil companies in 2013.