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Trans-China pipeline deal signed
( 2002-07-05 08:40 ) (7 )

Two oil giants are leading a project to build a pipeline across China, in one of the country's largest engineering projects since the Great Wall.

Petrochina, China's top oil company, has signed a deal with a consortium led by Anglo-Dutch energy group Shell to build an west-to-east pipeline across the country.

The pipeline, which stretches from north western deserts to Shanghai on the east coast, represents one of the biggest engineering feats in China's history.

Only the Three Gorges Dam, which is costing China's government about $25bn, constitutes a larger task.

The companies want to finish building the 4,000km pipeline by 2004, at which time 12 billion cubic metres of gas a year should flow from Xinjiang through eight intervening provinces and across both the Yangtse and Yellow Rivers all the way to Shanghai.

Huge reserves

Petrochina, which is part-owned by BP, will take a 50% stake in the project, with consortium members Shell, US-based ExxonMobil and Russia's Gazprom taking 15% each.

The remaining 5% will go to Sinopec, China's main indigenous oil firm.

Petrochina has huge gas reserves in the Tarim Basin in Xinjiang, a mountainous and on occasion lawless region, and is desperate to make them accessible to the rest of the country.

A collateral advantage would be to help wean Chinese consumers off coal, part-responsible for the smog which envelops many Chinese cities.

The project is likely to cost around $20bn, with pipeline construction, at a price tag of $5.5bn, largely paid for by the three foreign firms.

Upstream spending, the industry term for the cost of exploration and development rather than refining and shipping, will cost the companies a further $3.3bn.