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PetroChina to Expand Its Oil Network

China's largest oil and gas producer, Hong Kong-listed PetroChina, plans to invest up to 100 billion yuan (US$12.3 billion) to expand its oil and gas pipelines by 15,000 kilometers over the next five years.

The new pipelines will be concentrated in the southwestern, northwestern and northeastern areas of China, with a cross-border pipeline construction also on state-owned PetroChina's budget, said a company statement released by the State-owned Assets Supervision and Administration Commission of the State Council yesterday.

The oil giant, by expanding its pipeline network, aims to secure oil and gas supplies to the end users. The company also seeks to enhance its refining business and fortify its footing on the domestic market in refined oil retailing which is to see escalating competition within the industry in the coming years, said experts.

Of the 15,000 kilometers of pipelines to be completed by 2010, 8,000 kilometers will be used for natural gas transportation, 3,000 for crude oil and 4,000 for refined oil.

The new oil pipelines will link PetroChina's major oilfields to the refineries, and then pump the refined oils such as gasoline and diesel to oil storage facilities and service stations across the nation.

The pipelines under-construction for refined oil and crude oil transportation in the western region are scheduled to go operational by the end of this year and next August respectively. These lines total 4,000 kilometers, the company statement said.

The company did not specify the details of the two lines.

Other lines linking large-scale PetroChina refineries in the northeast and northwest such as the Lanzhou refinery of Gansu Province, and Jinxi refinery of Liaoning Province to the fuel guzzling northern and central areas of China are also being prepared. 
Part of the pipeline designed to pump crude oil from Kazakhstan to PetroChina's Dushanzi refinery in the Xinjiang Uygur Autonomous Region of Northwest China, is expected to go online by the end of the year.

The cross-border pipeline will ensure more crude supplies to PetroChina refineries from PetroKazakhstan, recently acquired by PetroChina's parent company China National Petroleum Corp (CNPC) for US$4.18 billion, a CNPC insider declining to be identified told China Daily.

PetroChina's ambitious plan was announced shortly after the company unveiled its long-term plan to speed up its refining business.

The State-owned oil company said at the end of last month that it aimed to expand the annual crude processing capacity of its four oil refining and petrochemical production bases in Fushun and Dalian in the northeast, and Lanzhou and Dushanzi in the northwest, to at least 10 million tons each.

"PetroChina will speed up the development of the refining and petrochemical businesses within the next five to 10 years to meet soaring demand in the domestic market as the economy booms," said Wu Guanjing, director-general of the Hong Kong-listed oil company's refining and chemical research and development centre.

"The expanded pipeline network is a must for moving the increased refined oil production," Gong Jinshuang, a senior CNPC analyst told China Daily.

The current oil shortage, the nadir of which was last month's gasoline rationing in South China's Guangdong Province, was largely due to a lack of transportation.

Chen Ge, spokesman of the nation's largest oil refiner Sinopec, blamed the oil shortage in Guangdong on the typhoons that halted oil shipping, currently Sinopec's main method for moving oil from the northern refineries to the south.

"It is more urgent for PetroChina to build the pipelines, as most of PetroChina's refineries are in the north, while Sinopec has a more extended refinery layout reaching to east and south," said Zhang Jian, an industry analyst with China Securities.

PetroChina may also seek to safeguard its refined oil-retailing network across the nation, by expanding the refined oil pipelines, because an increasing number of both domestic and foreign oil companies are eyeing the retail market, said Zhang.

(China Daily September 15, 2005)

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