Modernizing China's oil and gas sector : structure reform and regulation

34455 Modernizing China's Oil And Gas Sector: Structure Reform and Regulation Consolidated Joint Report of the World Bank and the Institute of Economic System and Management November 20, 2000  CONTENTS Preface..................................................................................................................................i Executive Summary ...........................................................................................................iii Chapter 1: A Sector in Transition: China's Oil and Gas Sector Moving to a Market Economy..............................................................................................................................1 1.1 Background .........................................................................................................1 1.1.1 Sector Change and Legal Framework.........................................................3 1.2 Barriers to a Successful Transition......................................................................4 1.3 Policy Objectives.................................................................................................6 1.4 Key Areas for Comprehensive Reforms .............................................................7 1.5 Guidelines for Reform and Phased Implementation ...........................................8 Chapter 2: Creating a Competitive Sector Structure ..............................................10 2.1 Overview and Objectives ..................................................................................10 2.2 Corporate Governance and Ownership .............................................................11 2.3 Increased Upstream Exploration and Development..........................................11 2.3.1 Access to Petroleum Mineral Rights.........................................................11 2.3.2 Access to Markets .....................................................................................13 2.3.3 Introduction of Market Forces: Crude Oil Pricing, Allocation, and Competition...............................................................................................................15 2.4 Increased Downstream Oil Efficiency ............................................................166 2.5 Increased Downstream Gas Market Penetration...............................................19 Chapter 3: Regulatory Reform: Promoting Transparency, Investment, and Competition.......................................................................................................................24 3.1 Role of Regulation ............................................................................................24 3.1.1 The Nature of the Regulatory Body..........................................................25 3.1.2 Need for Regulatory Change.....................................................................25 3.1.3 Scope and Depth of New-Style Regulation...............................................26 3.2 Regulatory Framework: Principles to Drive Investment...................................27 3.2.1 Separation of Regulation from Policymaking...........................................27 3.2.2 Independent Regulatory Decisionmaking.................................................28 3.2.3 Removal of Policy and Regulatory Responsibilities from SOEs..............29 3.2.4 Transparent Regulation .............................................................................29 3.2.5 A Sound Legal Framework .......................................................................29 3.3 Proposals and Objectives for Sector Regulation...............................................31 3.3.1 Organizational Options .............................................................................31 3.3.2 Policy Issues to Be addressed....................................................................32 3.4 Transition Period...............................................................................................34 3.4.1 Organization and Relationships in the Transition Period..........................36 3.4.2 Required Studies to Prepare for Regulatory Change ................................38 3.5 Conclusions on Regulatory Reform..................................................................39 Chapter 4: Summary: Challenges and Phased Implementation..............................41 4.1 Major Challenges ..............................................................................................41 4.2 Need for Transition and Legal Framework.......................................................41 4.3 Making a Start: Regulation of the Downstream Gas Industry..........................42  4.4 Implementation and Road Map.........................................................................43 Annexes 1 List of Experts that Participated in the Work Group Meetings 2 A Comparative Analysis of the Upstream Fiscal Terms for China 3 Market Opening and Security of Oil Supply 4 "Qualification" or "Certification" of Participants in Oil and Gas Operations 5 A Comprehensive Listing of Proposed Regulatory Activity 6 Environmental Regulation 7 International Cases of Structural and Regulatory Reform Tables 1.1 Primary Energy Production and Consumption, 1990