China’s Sinopec to sell stakes in 2,200km gas pipeline

Asia’s largest oil refiner is looking for no more than 15 investors who could each inject at least $150m into its Sichuan-to-Shanghai project.

China Petroleum & Chemical Corporation, known as Sinopec, has decided to sell a 50 percent stake in a major natural gas pipeline to raise capital for new projects. 

The company’s board of directors has approved a proposal to inject fresh capital into its Sichuan-to-East China Gas Pipeline project, according to a filing at the Hong Kong Stock Exchange. 

Asia’s largest oil refiner plans to invite no more than 15 investors, who will have to invest at least 1 billion yuan ($150 million; €135 million) each in the project and pay cash, the company said in a filing at the China Beijing Equity Exchange. Qualified investors should have at least 4 billion yuan in total assets, or manage at least 6 billion yuan in assets. Sinopec will retain the remaining half of the pipeline company. 

Sinopec said it had invested around 62.7 billion yuan in the 2,229km pipeline project, which started commercial operations in 2010. The project is able to transport as much as 12 billion cubic metres of natural gas a year, linking six provinces and two municipalities, including Shanghai. In 2015, the pipeline delivered 8.3 billion cubic metres. 

The project is the largest of Sinopec's four gas pipeline networks, which have a total length of 4,546km, according to the company's website. Analysts from China International Capital Corporation and Sanford C. Bernstein & Co said the pipeline could be valued at between 29-40 billion yuan. 

The sale proceeds will be used to develop new gas pipelines, expand capacity and build storage facilities, as well as support operations and reduce debts, the company said. China Petrochemical Corporation, the refiner’s state-owned parent, received government approval to build an 8,400km West-East gas pipeline network last October, a project expected to cost about 130 billion yuan. 

Sinopec’s announcement follows a similar move last year by rival PetroChina. The company sold a 50 percent stake in its Trans-Asia Gas Pipeline Company to a unit of state-owned asset management company China Reform Holdings Corporation for 15.5 billion yuan in November. 

China National Petroleum Corporation, the state-owned parent of PetroChina, decided in June to build a gas pipeline linking Shaanxi to Beijing. The asset is expected to span more than 1,000km and carry 25 billion cubic metres of gas annually.   

The state energy giants' recent moves are seen by analysts as hints that the Chinese government has set aside previous plans to spin off pipeline assets of major companies into an independent pipeline entity.