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BP Amoco plans major China joint venture Gas marketing part of strategic agreement with PetroChina to build infrastructure; BP may also market gas from Siberia Petroleum News Alaska
BP Amoco said March 23 that it plans to form a gas marketing joint venture with PetroChina aimed at supplying the rapidly growing energy markets of eastern China.
The plan includes cooperation in building infrastructure, possibly including an LNG terminal, to supply imported and domestic gas to the regions around Shanghai and the Yangtze River Delta. Gas currently meets just 2 percent of China’s energy needs, but this is projected in government plans to increase to between 7 percent and 8 percent by 2010.
The gas project is part of a strategic alliance agreed in principle between BP Amoco and PetroChina March 23 which also includes a preliminary agreement to build a fuels marketing business in China’s coastal provinces with the prospect of further expansion into other regions.
First year plan for 150 service stations Including some existing sites, the companies aim to build or acquire up to 150 service stations in the first year of operation, and maintain that momentum towards building a significant retail presence within five to seven years. They will also consider joint expansion in lubricants and aviation fuels. BP Amoco currently has joint-venture operations at 17 airports in China.
The alliance additionally allows BP Amoco involvement in the West-East China gas pipeline and, longer term, the potential to market gas from East Siberia where BP Amoco has an interest in the giant Kovyktinskoye field. Both these options are subject to feasibility studies and appropriate approvals.
BP Amoco separately said it will take 20 percent of the shares currently being offered, up to a maximum of $1 billion, by PetroChina through its Initial Public Offering.
Describing China as “an immensely important market for us”, BP Amoco chief executive Sir John Browne said: “This alliance with PetroChina has the strong support of the Chinese government. We regard it as a powerful strategic step which will help us expand our operations in China across our business streams.”
Gary Dirks, BP Amoco’s executive president for China, said: “In particular, this agreement gives us access to China’s gas markets which promise massive growth in demand over the next decade as the country moves from coal to cleaner fuels. This fits well with the very significant gas position we will have in Asia after completing our combination with ARCO.”
PetroChina is China’s largest oil and gas firm BP Amoco said that PetroChina is China’s largest oil and gas company, with operations in oil and gas exploration and production, refining and marketing, natural gas and chemicals. As of Sept. 30, PetroChina had estimated reserves of approximately 10.8 billion barrels of crude oil and approximately 24.3 trillion cubic feet of natural gas.
In the nine months to September 30, 1999, it produced 583.3 million barrels of crude oil and 324.7 billion cubic feet of natural gas for sale. As of end-1998, it owned and operated approximately 95 percent of China’s onshore natural gas pipelines.
Following its combination with ARCO, BP Amoco said, it will have some 35 trillion cubic feet of gas resources in the Asia-Pacific region, including China, Australia, Indonesia, Malaysia and Thailand. Also included is BP Amoco’s interest in the giant Kovyktinskoye field in East Siberia which is currently the subject of a feasibility study to export gas by pipeline to north and north-east China.
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