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Massive Oil Scheme in the Pipeline
PetroChina, the country's largest oil company, said on Tuesday that it has invited the world's top three oil conglomerates for negotiations to participate in the US$18.1 billion west-east gas transmission project.
A spokesman for PetroChina said BP, Exxon Mobil and the Royal Dutch/Shell Group was selected as the most qualified partners from a short list of seven companies for negotiations. But he added: "It is still subject to negotiations whether all the three companies, or just one or two of them, will be selected for the project".
BP, one of PetroChina's shareholders, leads a consortium that includes three Japanese companies -- Mitsubishi, Itochu and Nissho Iwai -- and Malaysian state-owned oil company Petronas.
Exxon Mobil submitted a bid with China Light and Power, while Royal Dutch/Shell turned in a bid of its own.
PetroChina said it would finalize its partner(s) as early as this month.
Last month,, PetroChina drew a short list of seven companies from a total 19 which submitted their initial investment proposals, as potential negotiation partners.
A PetroChina official said: "It is understood that the other four candidates, including Hong Kong China Gas, two Russian companies and a US pipeline company, have failed to meet our standard. Generally speaking, they won't be involved in the project."
The project, which aims to pipe more than 12 billion cubic metres of gas annually from Xinjiang's Tarim Basin to the energy-starved Shanghai and Yangtze River Delta by 2005, is regarded as the centrepiece of China's attempt to develop its economically backward but resource-rich western regions and to better protect the environment in eastern regions.
The official said the three candidates have all expressed their willingness to join the gas exploration and production in the Tarim Basin, the construction of a 4,000-kilometre-long pipeline and the pipeline networks in target markets.
PetroChina has said it would offer equity on natural gas fields in the Tarim basin to foreign firms to attract them into the pipeline construction, but that if the three companies want to join PetroChina in tapping the gas in Tarim, they must invest in the construction of the pipeline.
The six oilfields in Tarim, with an area of more than 700 square kilometres, include one of China's largest gas discoveries, Kela-2. It is the first time PetroChina has opened such a major field to foreign companies.
Kela-2 is estimated to have a proven gas reserve of 250.6 billion cubic metres and has targeted annual output at 10 billion cubic metres by around 2004.
PetroChina will hold a dominant stake in the gas fields, while foreign partners are allowed to control the major pipeline.
The company hopes to start the construction of the pipeline in October with the project reaching completion in 2004.
PetroChina signed letters of intent for gas sales with 33 companies from five provinces and municipalities the pipeline will be laid in.
Consumption is expected to reach 9 billion cubic metres a year by 2005, the break even point for the project to cover its costs.
Experts say there has been great market potential in the Yangtze River Delta region. The potential demand in the region will reach 4.3 billion cubic metres in 2003, 7.4 billion in 2004, 10 billion in 2005 and 20 billion in 2010.
With the project, China hopes to see the gas consumption in its energy mix increase from the current 2.1 per cent to 3 per cent.
Source: chinadaily.com.cn
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