PetroChina plans massive A share issue

PetroChina plans massive A share issue

BEIJING (Reuters): Chinese oil giant PetroChina Co Ltd said on Friday it is planning the biggest ever domestic A-share offer to raise funds for a massive natural gas pipeline project.

A top official said the offer to local investors was possible this year and that the proceeds would go to developing gas fields to feed gas into its planned 4,200 km pipeline, which will stretch from the western region of Xinjiang to eastern Shanghai city.

"Based on the company's development and fund raising needs, we expect that PetroChina's A-share listing will probably be the biggest ever fund-raising exercise in China's domestic capital markets," said Wang Fucheng, executive director and vice president of PetroChina.

"We do not rule out the possibility of issuing A shares around the end of this year," he said at a news briefing. "This year and next year are both a good time for the domestic market." He declined to give further details.

Foreign investors and analysts have raised concerns over whether gas resources were sufficient and whether the market existed to justify the large project, which will cost an estimated US$14.5 billion.

PetroChina is already listed on the New York and Hong Kong stock markets. But analysts say the domestic A-share market is attractive because of it typically provides higher valuations and cheaper funding.

Another overseas-listed Chinese oil major, China Petroleum & Chemical Corp (Sinopec), said earlier this month it planned to raise more than 10 billion yuan ($1.2 billion) with an A-share offer, which would make it the biggest issue yet.

Wang said PetroChina's offer would be well-received, given expectations for a performance matching last year's, when the company had net profits of 55.23 billion yuan.

PetroChina officials also sought to soothe fears over the east-west pipeline saying preparations were proceeding smoothly.

Wang said PetroChina had just raised estimates for reserves in two areas that will supply the pipeline -- the Tarim Basin in Xinjiang and Erdos Basin in western China.

PetroChina had raised its estimate of the proven natural gas reserves in the Tarim Basin to 650 billion cubic metres by the end of this year or the first half of next year from the previous 491 billion cubic metres, Wang said.

For the Erdos Basin, the company now put reserves at 1.0 to 1.1 trillion cubic metres by the end of this year, against the current 750.4 billion cubic metres, he said.

Wang said the estimated cost of the project had not changed and that construction on a pilot section of the pipeline was on track to start in the fourth quarter and finish by 2005.

"The various preparatory work of the west-east gas pipeline project is being carried out in a timely and systematic manner," he said. "The downstream market continues to expand."

PetroChina also repeated that a bill approved by the U.S. House of Representatives seeking to punish companies operating in Sudan would not hurt the Chinese firm as it did not currently have assets or investment in the African country.

PetroChina's parent, China National Petroleum Corp, owns a stake in an oilfield in Sudan and plans to establish two new fields, officials say.

In June, House members approved the "Sudan Peace Act", which included an amendment that would prohibit foreign companies from being listed on U.S. stock exchanges if they engage in oil exploration in Sudan, the site of a bloody 18-year civil war.