China National Petroleum Corp. plans to invest more than CNY100 billion ($14.6 billion) in a third West-East natural gas pipeline, the chief consultant of the China Petroleum Pipeline Bureau said Monday.
"Preliminary work has already started on the pipeline, which will likely have an annual transmission capacity of 20 billion-30 billion cubic meters of gas sourced from Central Asia," Su Shifeng told reporters.
Su is a former general manager of China Petroleum Pipeline Bureau, a unit of CNPC.
The pipeline will start in the northwestern region of Xinjiang and run parallel with the second West-East pipeline as far as Jiangxi province in eastern China, he said.
It will then take a different route to its final destination, mostly likely the coastal province of Shandong, although this has yet to be decided, he said.
However, he said it wouldn't terminate in Beijing as the capital is already well-served by three pipelines running from the gas-rich province of Shaanxi.
CNPC's plans reflect China's desire to boost the share of natural gas in its energy mix and reduce its reliance on coal and crude oil, which are more polluting.
The country's first West-East pipeline runs from Xinjiang in northwestern China to Shanghai.
This was followed by a pipeline running more than 7,000 kilometers from Xinjiang to Guangdong province and Shanghai, transporting natural gas from Turkmenistan. The pipeline is due to be completed by 2011.
In total, oil and gas pipelines operated by CNPC span more than 47,000 kilometers, and the company plans to almost double that figure by 2020.
In addition to cross-border pipelines, China is building a string of liquefied natural gas receiving terminals along its coastline to receive term cargoes from Australia, Qatar and Malaysia as well as spot supplies.
CNPC's unit PetroChina Co. (PTR) is close to a deal with Exxon Mobil Corp. (XOM) to buy 2 million metric tons a year of LNG from Australia's huge Gorgon gas field, a person familiar with the situation said last month.
Myanmar Gas Pipeline Delay
"Construction of strategically important oil and gas pipelines, such as those from Central Asia, Russia and Myanmar, will be accelerated by China's recent stimulus package, which emphasizes spending on infrastructure," Su said.
CNPC plans to begin preliminary work on a cross-border gas pipeline from Myanmar to China in the fourth quarter of this year, Su said.
Development of this project has been delayed by the Myanmar government's insistence that CNPC develop the gas pipeline together with a crude oil pipeline, he said.
Initial plans for the oil pipeline are for it to run from Myanmar's western port of Sittwe to Kunming city in Yunnan. Its initial capacity will be 20 million metric tons a year, equivalent to around 400,000 barrels a day.
It will allow China to import oil from the Middle East or Africa without having to pass through the potential choke point of the Strait of Malacca. It would also mean big savings on shipping costs.
However, it has proved difficult to source crude oil for the pipeline, and CNPC wants to press ahead with the natural gas pipeline first, he said.
Qin Guangrong, provincial governor of Yunnan province, said Mar. 6 the governments of China and Myanmar were in talks to finalize details of an agreement to build both pipelines.
Discussing CNPC's other investments, Su said construction of a 170-kilometer pipeline to carry crude oil from the Russian border to Daqing in Heilongjiang province would begin this year following a landmark oil-for-loans deal last month. The spur pipeline will likely be ready for use in 2010.
CNPC will import 15 million metric tons of crude annually for 20 years in exchange for Chinese banks lending $25 billion to Russia's state-owned oil producer OAO Rosneft (ROSN.RS) and pipeline operator Transneft (TRNFP.RS).
However, Su said a detailed plan for construction and investment in a separate spur pipeline on the Russian side of the border still hasn't been finalized.
The pipeline will run from the terminus of the East Siberian pipeline at Skovorodino to the Chinese border.