Shell to ink PetroChina pipeline deal


The West-East pipeline will be the largest project in China that involves an overseas company

HONG KONG, China -- PetroChina Co. and Royal Dutch Shell Group plan to sign an investment deal on the West-East gas pipeline on July 4.

The venture is expected to mark the largest investment involving an overseas partner in China. The Three Gorges dam is the largest all-Chinese project (full story).

Shell is expected to put in $18 billion to help construct the 4,000 kilometer pipeline. The West-East line will run to Shanghai on China's east coast from the gas fields in Xinjiang province, adjoining Kyrgyzstan and Kazakhstan.

A group headed by Shell inked a deal with PetroChina late last year that sees the Shell team take on 45 percent of the project. PetroChina will retain 55 percent ownership.

Original deadline missed

PetroChina missed its initial deadline for construction to start in October, due to delays lining up financing. Construction is now slated to start in 2004.

ExxonMobile and the Russian company OAO Gazprom are also likely to join the Shell team.

PetroChina is one of the country's three large oil and gas operators, together with Sinopec and CNOOC.

Analysts expect a jump in PetroChina's stock-price as a result of the investment. The government has pushed natural-gas as a clean-fuel source in China, in its latest five-year plan.

Stock up in late Friday trade

It has called for gas to make up 10 percent of China's energy needs within the next decade. Gas power now only accounts for 2.1 percent of energy needs.

Separately, PetroChina finished an oil tank farm in the northwesterly province of Qinghai. That project cost 23.7 million yuan.

PetroChina shares closed Friday up 1.22 percent at HK$1.66.