BEIJING: China is introducing new rules from January for lowering costs of transporting oil products by pipeline, state planner National Development and Reform Commission (NDRC) said on Tuesday.

NDRC said in a notice on its website that under a new mechanism, it will set the maximum permitted revenue level for oil product transport by state-owned China Oil and Gas Pipeline Network Corp, known as PipeChina, for three years.

PipeChina was formed in 2020 in a push to restructure the industry, expand supplies and reduce costs for end-users, with pipeline assets from China’s state-owned oil giants transferred to the new company. Inter-provincial pipeline transport rates will then be determined through annual consultations between PipeChina and users.

If the parties fail to agree on a price, NDRC will set the fee based on the minimum cost of alternative transport methods. If the pipeline operator’s annual average revenue exceeds the maximum permitted revenue, the excess will be deducted.

The rule also specifies that pipeline transport rates for oil products should not exceed those of other transport methods, such as rail. China is the world’s biggest importer of crude oil and second-largest consumer of oil after the US But its refineries are struggling with low profit margins and declining demand.