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International Consortium May Quit China Project

Termination of $5.6 billion agreement likely...

Construction of the $5.6 billion West-East gas pipeline in China is under threat. The international consortium, which includes Gazprom, Royal Dutch/Shell and ExxonMobil, failed to coordinate commercial details of the project with Chinese PetroChina. Now the consortium considers termination of cooperation.

According to the original plan, PetroChina was going to build the largest gas pipeline in China in cooperation with foreign investors. In 2002, the Chinese company signed a legally non-binding agreement on establishment of the international consortium where a 55% stake was to be given to PetroChina and 15% stakes had to be given to Gazprom, Royal Dutch/Shell and ExxonMobil.

However, so far the partners have failed to coordinate commercial details of the project and PetroChina is building the West-East pipeline independently. The first extension 1,500 kilometers long connecting the western fields of the Ordos Basin with Shanghai was completed at the end of 2003, PetroChina is currently building the second extension of the pipeline to connect the fields of the Ordos Basin with the Tarim Basin.