West-East Gas Pipeline in Sight

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Last updated at: (Beijing Time) Monday, June 24, 2002

West-East Gas Pipeline in Sight

A billion-dollar deal between PetroChina and Royal/Dutch Shell on a west-east gas pipeline is likely to be reached at the end of this month. The project is the second largest in China since the People's Republic was founded in 1949, next only to the Three Gorges Dam.

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A billion-dollar deal between PetroChina and Royal/Dutch Shell on a west-east gas pipeline is likely to be reached at the end of this month.

According to a senior industry official, principal terms of the joint venture have been settled and only technical problems remain to be discussed.

The talks had been difficult, but were drawing toward an end, the official was quoted as saying. He did not give a definite date as to when the construction will start.

The joint venture, which is worth 5.6 billion US dollars, aims to build a 3,900-kilometer pipeline to transport natural gas from northwest China's Xinjiang Uygur Autonomous Region to Shanghai on the east coast.

The project is the second largest in China since the People's Republic was founded in 1949, next only to the Three Gorges Dam.

Construction had been scheduled to start last October, but was put off due to prolonged negotiations between PetroChina and a consortium of foreign companies led by Shell.

Last December, PetroChina preliminarily agreed to allow the Shell-led consortium to own a 45-percent stake in the project, including gas field development, pipeline construction and gas marketing.

The consortium originally comprised Shell, the world's largest gas producer Russia's Gazprom, Stroytransgaz and Hong Kong & ChinaGas.

Exxon Mobil, together with Hong Kong's CLP Holdings, is set to take a share in Shell's 45-percent stake, China Daily quoted the industry official, who ruled out possibility of more foreign companies to participate in the project.

The pipeline will be able to transport 12 billion cubic meters of gas annually for 20 years, and is seen as the flagship project to anchor China's drive to develop its resource-rich, but economically backward western regions.

The project is also the backbone of the government's policy to encourage gas consumption to alleviate the country's heavy reliance on oil imports and to protect the environment in affluentcoastal areas.

The government's goal is to raise natural gas consumption to ten percent of the energy mix from the current 2.1 percent over the next 10 years.

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