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China's 4,000km gas pipeline project is delayed by SARS

An agreement to establish an US$8.5 billion joint venture between Chinese energy giant PetroChina Co and an international consortium led by Dutch/Shell Group has been delayed due to SARS, sources close to the negotiations said yesterday.

The joint venture agreement between PetroChina and the consortium which also includes ExxonMobil and Russia's GazProm was slated to be inked by this month with the aim of building and managing a 4,000km pipeline from western China to the eastern Yangtze River delta.

The pipeline is expected to supply 12 billion m3 of natural gas annually to China's heavily populated east by 2005.

"We cannot say that during the SARS outbreak contact between partners and PetroChina was not affected completely but we have maintained contact through other channels, like fax, phone and the Internet," Sara Du, a spokeswoman for Exxon in Beijing said.

Russian sources close to the talks said contact had been completely cut off.

"There has been no contact between the parties since March when SARS hit China," a Russian source close to the talks said.

"PetroChina officials also cancelled a visit to Moscow," the source said.

The "West-East Gas Pipeline Project," the largest project opened to foreign cooperation since China began its reform and opening up, will bring natural gas from the Tarim Basin in the northwestern Xinjiang region to bustling and energy-hungry Shanghai, passing through 10 provinces.

Officials from Dutch/Shell, leader of the consortium, said that negotiations were ongoing but declined to comment about any delays in the deal.

"We're still in negotiations with PetroChina over the [joint venture] contract," Nick Wood, spokesman for Shell said.

"We are committed to concluding negotiations as fast as we can ... Shell is leading the discussions but the issues under discussion are confidential," he said.

Earlier this year, Shell cancelled non-essential trips to Beijing, southern China, Hong Kong and other destinations because of the outbreak of SARS.

The three-phase agreement is expected to give the partners a 15 percent stake each in the project including participation in upstream gas extraction, construction and management of the US$5.2 billion pipeline and participation in downstream gas sales.

According to the China Daily, PetroChina has gone ahead with the construction of the pipeline without the joint venture, completing a 1,400km section from Jingbian, Shaanxi Province to Shanghai.

Gas from Shaanxi will begin to flow by October, the paper said, adding that the company has completed 60 percent of the work on the western part of the pipeline that runs from Jingbian to Tarim.
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