PetroChina Sees Gas Pipeline Profit in Four Years

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Last updated at: (Beijing Time) Friday, December 14, 2001

PetroChina Sees Gas Pipeline Profit in Four Years

PetroChina, the nation's largest gas producer, yesterday said its US$280 million gas pipeline in Northwest China will generate profits within four years.

PetroChina, the nation's largest gas producer, said Thursday that its US$280 million gas pipeline in Northwest China will generate profits within four years.

The Sebei-Xining-Lanzhou pipeline, which runs 950 kilometres from Northwest China's Qinghai Province to the neighbouring Gansu Province, is one of the biggest projects by the central government to develop the plentiful natural resources of the economically backward western regions.

"We expect the pipeline to lose money in the first three years of operation due to low consumption, but it should break even in 2004," said Shi Xingquan, vice-president of PetroChina.

The pipeline, which started construction last year and began channelling gas in September, is designed to carry 2 billion cubic metres of natural gas a year. The consumption is expected to reach 500 million cubic metres next year.

"The pipeline would cover its production cost only when the consumption reaches 850 million to 1 billion cubic metres. We hope the consumption would reach 1 to 1.5 billion cubic metres in 2005," Shi said.

"It may take 10 years to get back the investment," Shi added.

The pipeline channels gas from the Sebei gas field in Qinghai Province through Xining, the provincial capital, to Lanzhou, capital of Gansu Province. The central government hopes the pipeline could ride two poverty-rid provinces to riches by selling their gas reserves. It also hopes the gas, as clean energy, will replace coal to improve the environment of western industrial cities like Lanzhou, one of the country's most polluted cities.

PetroChina's Shi said the pipeline also anchors the company's drive to convert its rich gas reserves into cash.

PetroChina, which controls 80 per cent of natural gas reserves in China, has difficulty in selling the gas because they lack extensive transmit networks and because customers have not become accustomed to using natural gas.

The company hopes to hitch a ride to sell more gas as the central government has decided to double its natural gas consumption in 10 years on consideration of air pollution and its heavy reliance on oil imports.

"Natural gas would be a profit pump for PetroChina in five to 10 years," Shi said.

The company is expected to see its gas production rise to 33 billion cubic metres by 2005 from the current 18.3 cubic metres.

In addition to the Sebei-Xining-Lanzhou pipeline, it is also working on building a 4,000-kilometre natural gas trunk, or west-east gas pipeline, to pipe gas from Northwest China's Xinjiang Uygur Autonomous Region to the coastal metropolis of Shanghai.

That US$14.5 billion pipeline is expected to start construction by the end of this year or early next year.

He said the Seibei pipeline would finally connect to the west-east pipeline to ensure a sufficient gas supply of both pipelines.

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