China signs deal for US$8.5b pipeline
China signs deal for US$8.5b pipeline
Agence France-Presse, Hong Kong
Chinese energy giant PetroChina Co, has signed a framework agreement with an international consortium led by Dutch/Shell Group to build an US$8.5 billion east-west gas pipeline, it announced Thursday.
Company vice president Wang Fucheng told a press conference that Petrochina would hold a 50 percent stake in the 4,000- kilometer (2,500-mile) pipeline.
Shell, along with consortium partners ExxonMobil of the United States and Russia's OAO Gazprom, will each have a 15 percent interest.
The remaining five percent will be held by Chinese oil firm Sinopec.
The pipeline will cost $5.2 billion to build, with the remaining $3.3 billion spent on operating costs.
Two junior partners were also named, the Hong Kong-listed China Light Power and Hong Kong China Gas Co., although no details were given as to the nature of their involvement.
The ambitious project, one of the largest of its kind ever in China, will bring natural gas from the Tarim Basin in the country's northwestern Xinjiang region to bustling and energy- hungry Shanghai in the east.
Construction of the pipeline has been delayed for several months because of the prolonged negotiations between PetroChina, one of China's main state-controlled oil and petrochemicals groups, and the consortium.
The terms of ExxonMobil's involvement was only announced on Monday, although it had been known the U.S. firm wanted to take part ever since the Shell-led consortium agreed to the 45-percent stake late last year.
At the news conference, Wang said about 35 percent of the total project investment would be equity financed by the consortium partners, with the rest financed using debt.
PetroChina's investment in the whole project will amount to $2.7 billion and the company had still to decide how this would be financed, Wang said.
The company did not rule out the possibility of an issue on China's yuan-denominated A-share market, he added.
The pipeline project has attracted criticism from human rights groups, who say the non-ethnic Chinese inhabitants of Muslim- majority Xinjiang are unlikely to see any benefits.
On Wednesday the London-based Free Tibet Campaign -- the pipeline will also run through Qinghai province, formerly part of Tibet -- said the project was "unlikely to be in the interests" of local people.