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China gas plan needs policies to woo foreign cash

SINGAPORE: China needs clear-cut investment policies for its mammoth gas pipeline if it is to woo foreign companies to the billion-dollar project, Chinese industry sources said on Monday.

Chinese Premier Zhu Rongji said last week foreign investors would be welcome to hold a majority stake and participate in the management of the proposed 4,200-kilometre (2,610-mile) pipeline designed to move gas from the underdeveloped west to the prosperous east.

But China needs to appraise gas reserves and put forward detailed investment policies for the joint financing and management in the pipeline and gas distribution project, sources with China-based foreign oil companies said.

The estimated cost of the pipeline is 120 billion yuan ($14.5 billion). The cost estimate rises to 300 billion yuan when investment for developing gas reserves and provincial pipeline networks are included.

"It looks like the government means business with this project. But we need to be very much assured of the related policies to be in place before making any major decision," an official with a Beijing-based oil major said.

China has so far no policies to allow foreign investors to participate in domestic gas distribution, or to take a majority stake in a pipeline.

"Zhu's comment was encouraging, but very general. We don't know what the details will be," the official said.

It remained unclear if foreigners were allowed to take a majority stake in the pipeline system, or whether joint management would apply to domestic gas distribution, sources said.

China aims to complete construction of the pipeline by the end of 2003, starting from the Tarim Basin in northwest Xinjiang and winding through the provinces of Gansu, Ningxia, Shaanxi, Shanxi, Henan, Anhui and Shanghai.

CHINA SPEEDS UP INVESTMENTS

The schedule was brought forward from an original target of 2007. The government wants to speed up investments in the country's poor hinterlands within the next five years.

Tarim Basin, the key source of supply, has an accumulated proven gas reserve of 419 billion cubic metres, Chinese official media have reported.

Sources said the Erdos Basin in northwest Qinghai province and the Changqing gas field in Shaanxi province would be tapped.

"We have to evaluate the proven reserves and officially present them to foreign companies," said an official with China National Petroleum Corp (CNPC).

PetroChina, the listing vehicle of the state-owned oil major China National Petroleum Corp (CNPC) was likely to be the leading partner of any Chinese consortium which groups both state and local interests, industry sources said.

A future joint venture would likely be formed between the PetroChina-led Chinese consortium and foreign parties.

PetroChina, on an international roadshow which started last week to market its initial public offering at the end of March or early April, expects to raise $3 billion through a dual listing in New York and Hong Kong.

The company has formed a task team headed by chief executive officer Huang Yan to manage the pipeline project. -Reuters