PetroChina in talks with oil giants for $18-b gas pipeline

China's leading oil company PetroChina plans to open talks with the world's top three oil conglomerates over the construction of an $18.1 billion gas pipeline, a report said on Wednesday.

PetroChina has picked British Petroleum, Exxon Mobil and the Royal Dutch / Shell Group for negotiations on constructing the 4,000 km pipeline which will run from northwest China to Shanghai on the east coast, the China Daily reported.

China said in February that 19 foreign energy companies had submitted bids to help build the pipeline.

BP, which holds a 2.2 percent stake in PetroChina, leads a consortium that includes three Japanese companies - Mitsubishi, Itochu and Nissho Iwai - and the Malaysian state-owned oil company Petronas.

Exxon Mobil submitted a bid with Hong Kong's China Light and Power while Royal Dutch/Shell also turned in a bid, the paper said.

PetroChina said it would make a final decision on which of the three will become its partner in the project as early as this month, the report added.

The project aims to pipe more than 12 billion cubic metres of gas annually from Xinjiang province's Tarim Basin to the booming coastal economy of Shanghai and the Yangtze river delta by 2005.

The pipeline is a centrepiece of China's drive to develop its economically backward but resource-rich western regions.

PetroChina has said it would offer equity on natural gas fields in the Tarim basin to foreign firms to attract them into pipeline construction but has made it a prerequisite that firms participate in the pipeline construction in order to tap the Tarim fields, the paper reported.

The six Tarim oilfields cover an area of 700 square km and include one of China's largest gas discoveries, Kela-2.

Kela-2, which is estimated to have gas reserves of 250.6 billion cubic metres and has targeted annual output at 10 billion cubic metres by 2004, is the largest field to be opened to foreign companies in China, the report said.

PetroChina would hold a dominant stake in the gas fields, while foreign partners are allowed to control the pipeline, which is expected to begin construction in October.

Any foreign firms striking a deal with PetroChina are likely to rouse the ire of environmental and human rights activists in the west.

China's plans to develop its impoverished western hinterland are fraught with controversy since Xinjiang is the homeland of China's beleaguered Muslim minority, the Uighurs.

PetroChina is also accused by US-based activists of profiting from human rights abuses in Tibet and Sudan.

economictimes.com