HONG KONG: CNPC Hong Kong Ltd, a unit of the mainland's biggest oil producer, is raising as much as $488 million selling new shares, according to a term sheet sent to investors.

The company is selling 450 million shares at HK$8.01 to HK$8.41 apiece, according to the document. The statement didn't give details of how the funds will be used. CNPC Hong Kong's company secretary, Patrick Lau, didn't immediately respond to calls made to his office.

CNPC Hong Kong, an oil and gas producer, has almost tripled in Hong Kong trading since PetroChina Co took a majority stake in the company in August 2008.

CNPC Hong Kong expects half its income to come from gas within five years, Chairman Li Hualin said in May, as China increases the use of the fuel to reduce its reliance on coal.

The petroleum producer wants to take advantage of its parent's reserves and pipelines to develop its gas distribution business in the mainland, according to Li.

In September, CNPC Hong Kong agreed to pay 616 million yuan ($90 million) to buy 49 percent of Zhongyou Zhongtai, a city gas pipeline operator, to expand its distribution network.

China, the world's second-biggest energy user, plans to double gas use to 5.3 percent of total energy consumption by 2010. A pipeline connecting fields in western China with the more populous east opened in 2004. A second pipeline is under construction.

The Hong Kong-based company operates 11 oilfields in the mainland, Kazakhstan, Thailand, Peru, Oman, Indonesia and Azerbaijan, according to its annual report last year.

Bank of America Merrill Lynch is arranging the share sale, according to the term sheet.

Bloomberg News

(HK Edition 12/01/2009 page4)