Here's what to expect from China's reform paper for the gas sector

There will be less government intervention.

PRC NG industry reform paper could be issued soon after the National People's Congress (NPC) meeting being held in Beijing, according to National Energy Administration last week.

According to Citi, the goal of the reform is to “liberalize the two ends; regulate the midstream”. Pricings at both upstream and downstream would be liberalized with less government intervention whereas midstream long-distance pipeline and LNG would make a fixed return of 8% ROA decided in 2016.

Here's more from Citi:

We reiterate our positive view on PRC downstream city gas sector expecting the PRC NG industry reform paper to be announced soon (i) to have moderate tone hence low investment risk; (ii) to boost NG sales volume growth; and (iii) to remove the overhang of connection fee cancellation.

The tone of the reform paper should be relatively moderate with the content similar to previous expectations, according to China Gas Association. The focus is to regulate the return of the midstream pipeline while there is not much comment on the downstream ones, though the control on the latter might be tightened.