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Shell stresses commitment to gas pipeline project
( 2003-10-08 14:34) (HK Edition)

The Anglo-Dutch oil giant Royal Dutch/Shell said it is committed to the participation in the US$5.2 billion west-east natural gas pipeline project, despite earlier reports that the negotiation with Chinese partners were at a deadlock.

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

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

"We will continue with the negotiations and hope that we reach a satisfactory conclusion as soon as possible."

The 4,000-kilometre gas pipeline aims to carry natural gas from Xinjiang Uygur Autonomous Region to Shanghai as part of the government's ambition to lift the economy of the impoverished western regions and to improve the environment in the east.

Under a framework agreement signed in July last year, Shell, ExxonMobil and Russia's Gazprom would each hold 15 per cent in the project.

PetroChina, the nation's largest oil and gas producer, would own half of the pipeline and Sinopec Corp, the rival Chinese company, the remaining 5 per cent. Final contracts, however, have not been signed.

The prolonged negotiations have caused much concern.

The Financial Times reported in late August that talks over contract terms had "taken longer than expected", quoting Philip Watts, chairman of Shell.

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

Merer said the negotiation did take time, considering the complexity of the project that involves the gasfield development, pipeline construction and marketing strategies.

"If you look at the international practice, it is not unusual that the negotiations last that long," said Merer.

"We do not have a specific deadline. We continue 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's participation in the project is to please the Chinese Government for support in other projects.

"For a project of that size, we do not participate on public relations basis," said Cheng. "The project is in line with own value, own strategy and own investment criteria."

Without foreign partners joining in, PetroChina started trial operation of the eastern section of the pipeline on October 1.

The section runs 1,400 kilometres from Jingbian in West China's Shaanxi Province to Shanghai.

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

They said Shell's investment in China would increase to US$5 billion in a few years from US$1.6 billion at present.

Besides the gas project, Cheng also said the company was promoting other clean energy 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 as feedstock for fertilizer producers.

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

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