Shell, ExxonMobil, Gazprom Each Take Stake in China Pipeline

Shell Group, ExxonMobil and Gazprom will each take a 15% stake in PetroChina's West-East pipeline project. Under a memorandum of understanding signed Saturday, the three companies will jointly proceed with discussions with PetroChina over participation in the 3, 900-kilometer gas pipeline linking Xinjiang in the west and Shanghai in the east. The pipeline would move 12 billion cubic meters of gas a year. It is scheduled to deliver the first gas in early 2004.

The MoU will end Shell's position as the leading foreign participant in the $20 billion project, which also includes gas development in Xinjiang and gas marketing in the east, according to sources close to PetroChina, a Shell executive said. The MoU will pave the way for PetroChina and the three-company consortium to sign a similar memorandum July 4th, which will also mark the official construction startup of the pipeline.

Last December, PetroChina awarded a consortium led by Shell a total 45% stake in the project. Now Shell has split the stakes among three companies in order to reduce the risks in the project. The three will sign agreements with PetroChina in the second half of this year to form joint ventures for gas exploration and marketing.