Industry insiders reveal that the State is considering the formation of a "State Energy Commission" or a "Ministry of Energy" in the hopes that mounting energy issues will be addressed in a comprehensive way so as to better fuel the country's booming economy.

The plan, according to experts, is likely to become part of wide-ranging restructuring of the central administration in March to further curtail the government's role in running businesses while enhancing its regulatory functions.

Such a commission also fits well with a predicted move by the government to create several regulatory commissions that might include management of State assets, banking, transportation, and telecommunications besides energy, media reports have said.

A source from the China National Offshore Oil Corp (CNOOC) said the new commission will likely be established in March if approved by the annual session of the National People's Congress, China's top legislative body.

Some industry insiders speculate that a leader from one of the country's three oil giants - China National Petroleum Corp, Sinopec Group and CNOOC - may take the helm of the new commission, which will be directly administered by the State Council.

As the country becomes integrated with the world's free markets and energy-related security and environmental concerns increase, the government has given signs that it is aware of the need to map out a strategic energy plan, but the scattered nature of the energy administration hampers government moves to fine-tune energy policy.

"China needs to set up an authority to execute a thorough study of energy issues," said an oil expert who declines to be identified.

Energy issues are currently governed by several ministries and departments including the State Development Planning Commission (SDPC), the State Economic and Trade Commission (SETC) and the Ministry of Land and Resources.

At SDPC alone, at least five departments deal with energy matters directly or indirectly, according to Gao Shixian, an energy analyst with the SDPC.

The result is that the guidelines for enterprise executives sometimes appear confusing and even conflicting.

Calls have been growing for institutional change in the energy industry, which has undergone major reforms in recent years, but still faces rising intricacies.

Establishing a "State Energy Commission" was listed as one of the core parts of China's oil strategy in the 21st century, jointly put forward by the SDPC and the SETC last March.

"Comprehensive administration of the energy industry is particularly important because the industry is often associated with national security and its business chain (from upstream to downstream) is very long," Gao said.

The current administrative system was inherited from the restructuring of government organizations.

In the early 1950s, shortly after the founding of the People's Republic of China, the country mimicked the Soviet Union by setting up a planned economy characterized by a government monopoly in almost all economic sectors including energy.

China started to recognize the need to relax control after the reform and opening-up policy was put forward in late 1970s, and the former State Energy Commission was established in 1981 to co-ordinate energy development.

As usual, the transition period from a planned economy to a market one has been characterized by frequent institutional changes.

The State Energy Commission was disbanded in 1983 and the Ministry of Energy was set up in 1988 and then dissolved in 1993.

This, according to experts, may well explain a common scenario in transitional economies: That when the government finds it controls too much, it tends to relinquish some of its power; when it loses control, it then looks to take back some of its authority.

A radical government shake-up took place in 1998 aimed at building a more market-oriented economy, and the government shifted a lot of energy business back to the corporations.

The problem, however, was not resolved. The country still appeared feeble in terms of improving its long-term strategy when confronted with the sophisticated international situation.

While many analysts believe an energy commission would be a step in the right direction, some newspapers have said the three giant State-owned oil companies could throw up a big hurdle. Because they have maintained a strong foothold in China and are tightly associated with the government, they may feel reluctant to lessen their economic clout.

What's more, the formation of a balanced industry will also take a lot of effort by the State to produce a viable plan, experts said.

(Business Weekly January 21, 2003)