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China's first JV pipeline construction start set

BEIJING: Construction of China's first natural gas pipeline to built with a foreign company is expected to start in September, industry sources said on Friday.

"We have finished the feasibility studies and are waiting for approval from the State Development Planning Commission", an official of the China National Petroleum Corp (CNPC) said.

The 680-km (422-mile) pipeline from the southwestern city of Chongqing to Wuhan, capital of the central province of Hubei, was a joint ventrue between CNPC and the US energy firm Enron, the official said.

It will have a capacity of three billion cubic metres a year, he said.

It might be extended to the city of Changsha in the southern province of Hunan if there were enough gas resources, he added.

The pipeline was expected to be completed at the end of 2001, the official said.

About 40 percent of the investment in $400 million pipeline project would be provided by the two companies and the rest from bank loans, an industry source said.

Enron would take a 45 percent stake in the project, the source said.

In August 1997, Enron Oil and Gas China Ltd signed a 30-year contract with CNPC to develop oil and gas reserves in the central part of the southwestern province of Sichuan. The tested maximum production of the first well was 281,000 cubic metres per day, another industry source said.

Whether gas for the pipeline would come from these concessions would be decided by CNPC's Sichuan office, Enron and the local government, the source said.

Natural gas demand in Hubei was expected to be 1.05 billion cubic metres in 2001, 1.7 billion cubic metres in 2002, 2.2 billion in 2003 and more than 3.0 billion in 2004, he said.

The accumulated proven natural gas reserves in Sichuan and Chongqing were 579.5 billion cubic metres, he said.

Sichuan, CNPC's biggest gas producer, pumped 7.564 billion cubic metres of natural gas in 1999.

China is speeding up exploration for natural gas.

Reserves in Ordos, Sichuan and Chongqing, Xinjiang and offshore areas would each be expanded to one trillion cubic metres in the next five to 10 years, Chen Geng, vice director of the State Petrochemical Industry Bureau, told a conference last week.

Premier Zhu Rongji told a news conference last week China wanted foreign firms to invest, manage, or even take a controlling stake in a cross-county gas pipeline from Xinjiang to Shanghai as part of efforts to develop the hinterland. -Reuters