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China approved on Tuesday proposals that would transform its oil, gas, and power markets, CCTV has reported.
Under the proposals, China will construct a new power system intended to be “economically efficient, flexible and intelligent in supply and demand coordination,” the Chinese Communist Party’s commission for deepening reports said.
Currently, China’s power grid is built on fixed, long-term power trading agreements, which has caused hydro-dependent provinces such as Sichuan to export power beyond its borders during times of drought in order to meet its contractual obligations—even as the province was cutting power to its own residents.
Under the new proposal, China would seek to allow more flexibility. It would also look to improve “national oil and gas security capabilities” that will ensure the reliable supply of fossil fuels.
China is the world’s largest crude oil importer, producing less than half of what it consumes. In May, China’s imports jumped to the third-highest level on record, official data showed, averaging 12.11 million barrels per day. This is a 17.4% increase over April, and 12.2% higher than May 2022.
In April, China’s state-run Datang International Power Generation was hoping that the government would go further with liberalizing its power market, with an eye to transitioning to cleaner energy. According to Datang, market reforms would allow it to decrease coal-fired power and increase renewable power, which would increase coal prices and subsequently make a transition to cleaner energy viable, Datang chairman Liang Yongpan said.
“The proliferation of market-based pricing is a matter of when, not if. We will see more interprovincial power sales and spot trading at favourable prices at times of peak demand,” Yongpan said at the time.
Fear of oil demand slowdown in China continues to be a major concern in the crude oil markets, and continues to weigh on oil prices, countering OPEC’s production cuts.
