PetroChina's $17 Billion Gamble

According to a top-ranking representative of PetroChina, by thee end of 2004 the overall investment in the West-East project for gas transportation from the Tarim field in Xingjiang to Shanghai will cost the company $16.9 billion including; $3.3 billion to be spent on gas exploration and production, $5.25 billion to be spent on pipeline construction and $10.29 billion to be spent on preparation of the sales market.

In 2002, an international consortium including Royal Dutch/Shell, ExxonMobil and Gazprom undertook to invest 45% of the necessary sum (50% was given to PetroChina and 5% to the largest Chinese oil refining company Sinopec). President of PetroChina Chen Geng reports that the overall coefficient of the project profitability will be 12% and adds that even if foreign investors give up participation in financing, gas transportation via the pipeline will start at the end of 2004.

Experts presume that PetroChina is starting to believe that it can develop this project independently and plans to receive pay back from its huge marketing potential even if this contradicts the will of the country's authorities. The State Council of China reported that by the end of 2003 overall investments in the project totaled $2.6 billion. This circumstance enables observers to presume that another Chinese partner, Sinopec, already contributed its share of investments.