The Yunnan Provincial Government approved the establishment of Yunnan Natural Gas Co., Ltd. in August 2016. At present, provincial pipeline companies have been established in a total of 17 provinces in China.

After years of development, these provincial pipeline companies have formed a complex pattern of equity and interests. Most pipeline companies are joint ventures between local stateowned enterprises and CNPC, Sinopec, and CNOOC, and some are also owned by private enterprises. CNPC, Sinopec, and CNOOC invest in the provincial pipeline companies selectively, often based in the regions where they have market advantages. CNPC has invested in five provincial pipeline companies, Sinopec in six provincial pipeline companies, and CNOOC in two provincial pipeline companies. Sinopec is the most active upstream company to share in the provincial pipeline companies and its shares are mostly along the Sichuan-to-East Gas Pipeline.

Many provincial pipeline companies were designed according to the concept of provincial natural gas resource dispatching platform, namely the policy of "unified purchase". However, as the policy changed, the provincial pipeline operation mechanism has gradually changed from "unified purchase and sale" to "overall allocation" and "gas transportation". Only the “gas transportation” service could be done when the provincial pipeline could not get the gas for "overall allocation" from the upstream gas suppliers. On the one hand, the upstream gas suppliers have a strong desire to directly sign a supply agreement with the downstream large users; on the other, the downstream users complain about the price mark-up by provincial pipelines and gas distribution companies, which places the provincial pipeline companies in a difficult situation, they are unable to get the benefits balanced (HUANG, 2016).

Straightening out and balancing the relationship between the provincial pipeline companies and the main pipeline companies are real challenges to promoting natural gas market liberalisation. The benefits of the provincial pipeline companies must be considered, regardless of whether the national pipeline companies that may be established will include provincial pipelines or promote the reform of pipelines through other market-oriented ways. The right way should be found to relieve the challenges and encourage provide provincial pipeline company initiatives to promote the market liberalisation reform so as to promote the overall reform in China.

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