By the OGJ Online Staff
LONDON, Jan. 9 -- Royal Dutch/Shell Group and its partners have agreed to take a 45% holding in PetroChina Co.'s $14 billion project to produce gas in western China and pipe it to Shanghai.
However, the second consortium bidding for a share of the project, led by ExxonMobil Corp., still is talking with Chinese authorities and is expected to emerge as a major shareholder in the project.
PetroChina said Wednesday it would hold the remaining 55% while talks continued. It did not say what share ExxonMobil could eventually take.
The Shell-led group includes Hong Kong & China Gas Co. and Russia's OAO Gazprom, the world's biggest gas company.
Natalya Selivanova of Gazprom said, "This is an intermediate stage and not a final winning, so it's too early to speak about a victory, but this is a significant step forward."
PetroChina has yet to reach an agreement with the Shell-led group on issues such as the price at which the gas will be sold, Gazprom added.
PetroChina had planned to begin building the 4,000 km pipeline and name a foreign partner last year, as part of a government effort to boost the use of gas and develop China's economically backward western region. Shell is understood to be willing to accept possible delays to win the right to explore for new gas resources.
A spokesman for BNP Paribas Peregrine Securities in Hong Kong said, "We may be looking at a half-year delay for this project. Considering this is such a large project, it is acceptable. Anything beyond that is not."'
Potential pipeline participants are especially enticed by the prospect of gaining access to some of China's biggest gas fields, in the northwestern Xinjiang province.
ExxonMobil leads a group that includes Hong Kong's CLP Holdings Ltd. Tang Ling, ExxonMobil's Beijing-based spokeswoman said, "We have received no indication that the process for selecting a foreign partner is over."
BP PLC, China's biggest foreign investor, led a group that withdrew its bid in September.
PetroChina, the country's largest oil producer, wants to complete the pipeline project to tap gas reserves in Xinjiang province by 2005 to help replace dwindling reserves from older fields and meet commitments to customers in Shanghai.
The company's profits from gas sales probably doubled to $24 million in 2001, according to financial analysts in Hong Kong, and the profit from that division could jump forty-fold to almost $1 billion in 2005, when the pipeline is due to be completed and production rises to 33 billion cu m/year.
The government caps Chinese gas prices to encourage the fuel's use and reduce reliance on coal. China plans to more than quadruple the use of gas by 2010 in favor of coal, which now accounts for 70% of its energy.
The price ceiling is discouraging companies from boosting their investments to explore for gas and build pipelines.
