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Shell's commitment in the pipe
( 2003-10-04 09:36) (China Daily)

The Anglo-Dutch oil giant Royal Dutch/Shell said they are committed to participation in the US$5.2 billion west-east natural gas pipeline project, despite earlier reports that said negotiations with their Chinese partners had reached a deadlock.

Company officials said, however, that there is no deadline to conclude the negotiations, even though the pipeline is set to start commercial operation by the end of this year.

"The west-east pipeline is a key project, and we are pleased to participate,'' said Yves Merer, president and managing director of Shell China Exploration and Production Co Ltd, in an interview.

"We are continuing the negotiations and hope that we will reach a satisfactory conclusion as soon as possible.''

The 4,000-kilometre west-east gas pipeline will carry natural gas from the remote desert in the Xinjiang Uygur Autonomous Region to Shanghai, as part of the government's plan to encourage economic development in the relatively backward western regions and to improve the environment in the country's eastern coastal regions.

Under a framework agreement signed in July last year, Shell, ExxonMobil and Russia's Gazprom each holds 15 per cent in the project. PetroChina, the nation's largest oil and gas producer, owns half of the pipeline and Sinopec Corp, the rival Chinese company, 5 per cent.

But the companies have not yet concluded a legal contract, and the prolonged negotiations are arousing a lot of concern.

The London-based Financial Times late in August quoted Philip Watts, chairman of Shell, as saying that talks over contract terms had "taken longer than expected.''

The report quoted Watts as saying that there was no end in sight in discussions over investment terms for the pipeline.

Merer said the negotiations were expected to take time, considering the complexity of the project, which involves the gas field development, pipeline construction and market development.

"If you look at international practices, it is not unusual for such negotiations to take this long,'' said Merer.

"We do not have a specific deadline. We are continuing to negotiate with our partners in good faith and with an open mind,'' he added.

Heng Hock Cheng, managing director of gas power for Shell China, denied that Shell is participating in the project to please the Chinese Government in order to get its support for other projects.

"We would not participate in a project of this size for the sake of public relations,'' said Cheng. "Participation in the project is being negotiated on the basis of its own value, with its own strategies and investment criteria.''

When asked whether Shell will pull out of the project if the talks breaks down, Merer said: "We continue to negotiate. We hope that we will reach a satisfactory conclusion.''

Without the involvement of its foreign partners, PetroChina started trial operation of the eastern section of the pipeline on October 1. The section runs from Jingbian, in Northwest China's Shaanxi Province, to Shanghai.

While reaffirming its good partnership with PetroChina, Shell's managers also emphasized the company's long-term commitment to China.

They said Shell's investment in China will increase from its present US$1.6 billion to US$5 billion over the next few years.

Besides the gas project, Cheng also said they are promoting other clean energy projects to contribute to sustainable development in China.

The company has recently signed four new licences for its coal gasification technology with Chinese fertilizer plants.

The technology turns coal into synthetic gas which is used in producing fertilizer.

"Shell's process enables the utilization of China's abundant coal reserves in a cleaner and more environmentally friendly way,'' said Cheng.

Meanwhile, the company has launched a campaign to promote "sustainable development'' as one of its business principles and practices.

The campaign consists of advertisements, forums, seminars and other events in four major cities -- Beijing, Shanghai, Guangzhou and Nanjing.

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