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Domestic Natural Gas Reserves Sufficient
PetroChina, the nation's largest gas producer, said it is not necessary to pump natural gas from Russia to feed its planned US$8.5 billion gas pipeline across China, although Russia's largest gas company is involved in the project.

Reserves in Tarim Basin, the major gas supply base for the project, plus reserves in nearby areas, will be able to supply the pipeline for its 45-year operation period, Shi Xingquan, vice-president of PetroChina, said in an interview.

Some analysts have said the pipeline, which is expected to run 4,000 kilometres from western Tarim Basin in Xinjiang Uygur Autonomous Region to Shanghai on the east coast, will lack an adequate gas supply. The analysts predict that the pipeline will need to snake over the western frontier to Russia for additional resources. That would make the project riskier and more expensive.

The pipeline, New China's second largest project since its establishment in 1949, is designed to run for at least 45 years, while PetroChina has thus far secured a 20-year supply of gas.

"Even if Tarim runs short, the domestic reserves, like Changqing and Qaidam Basin, could be supplements," said Shi. "Russia is the last choice."

Changqing, halfway from Shanghai to Tarim, enjoys a reserve double that found in Tarim.

Sources said Russia is reluctant to sell gas to the pipeline out of political concerns because the project involves British and US companies, including Royal/Dutch Shell and ExxonMobile.

"Shell and ExxonMobile have tried to convince Russia's Gazprom to sell gas to the project in its latter stages of development. The Russian company would not, which prolongs the negotiations, " the sources said.

Earlier this month, PetroChina signed a framework for the joint venture with Shell, ExxonMobil and Gazprom, to build the pipeline, develop the gas fields and market the gas together. PetroChina holds 50 per cent of the project, while the major foreign partners equally control 15 per cent. The remaining 5 per cent belongs to Sinopec.

The project aims to deliver 12 billion cubic metres of gas annually for at least 45 years.

Although the current 340 billion cubic metres of reserves PetroChina has detected in Tarim Basin is not enough, Shi said the reserve's volume is in line with international standards for getting such a project started.

"It is impossible to prepare all reserves at hand before a project launches," said Shi. "We can find more in the future."

(China Daily July 17, 2002)

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