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Chinese west-east pipeline secures funding

Chinese National Petroleum Corp has signed framework agreements with local state-owned and private companies to secure funding for the Third West-East natural gas pipeline

Chinese natural gas pipelines run by CNPC is due to be built within the year

The agreements were inked in Beijing on Wednesday with Baosteel, the National Council for Social Security Fund, China Urban Infrastructure Fund and the Industrial and Commercial Bank of China.

"Such cooperation will create a new model of joint private and public capital used to invest in large national projects," CNPC said in a report on its website.

The 30 billion cubic meters/year (2.9 Bcf/day) pipeline will cost more than Yuan 100 billion (USD 15.7 billion) and construction is expected to start within the year, with commercial operations targeted to begin in 2015, CNPC said.

CNPC fully funded the First and Second West-East gas pipelines and wholly owns and operates them. The 12 Bcm/year, 3,843 km (2,389 miles) First West-East pipe transports gas from the western Tarim Basin in Xinjiang to Shanghai. It started operations in 2003.

The 30 Bcm/year Second West-East pipeline, which transmits Turkmen gas imported by CNPC, was fully commissioned this month when the link to Shenzhen city in southern Guangdong province was launched. It was built at a cost of Yuan 142.2 billion, with a total length, including trunk lines, of 8,704 km.

"We decided to seek external investment for the third pipeline to lower our costs. In addition, there was a lot of interest from both state-affiliated and private companies to be partners," a CNPC spokesman said.

He added that the exact amount of funding from each company has not been finalised but CNPC will remain the controlling shareholder in the project. Foreign companies had not been approached, he said.

The China Securities Journal reported Thursday that the project would cost Yuan 116 billion. CNPC would retain a 52 per cent stake while Baosteel, China NCSSF and China Urban Infrastructure Fund would each have 16 per cent, the newspaper reported.

The new pipeline will link with the Central Asia-China gas pipeline network and start in Horgos in western Xinjiang province on the border with Kazakhstan -- the same start point as the Second West-East pipeline. It will pass through 10 provinces and the main trunk line will be more than 5,000 km long, CNPC said.

This is not the first time CNPC has sought investment for gas pipelines. It had lined up Shell, Gazprom and ExxonMobil in 2002 as partners in the First West-East pipeline but negotiations stalled and the proposed venture was scrapped in 2004.

 

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