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Shell to Develop Chinese Gas Field With PetroChina

THE WALL STREET JOURNAL: Shell to Develop Chinese Gas Field With PetroChina

By MATT POTTINGER

Staff Reporter of THE WALL STREET JOURNAL

May 18, 2005; Page B2

BEIJING — Royal Dutch/Shell Group made a final decision to pour $600 million into developing an onshore gas field in China with PetroChina Co., representing a major foreign investment in the country’s natural-gas sector.

The long-planned project between the Anglo-Dutch energy titan and China’s largest oil company involves producing natural gas from the Changbei field in northwest China for sale to provinces and cities to the east, said Shell’s executive director of gas and power, Linda Cook, in an interview in Beijing.

Shell, through a subsidiary, will spend the $600 million over a few years to cover the costs of developing and operating the field, Ms. Cook said. Once the field begins production in 2007, the gas would be distributed to Beijing, Tianjin, Hebei and Shandong via a pipeline that is being built by PetroChina. In November, Shell said plans for the Changbei project had been submitted to Chinese authorities for approval.

PetroChina confirmed the news in a joint release with Shell yesterday that also said Shell will be entitled to about half the volume of gas produced by the field over 20 years.

The project demonstrates how opportunities, while rare, exist for foreign companies in onshore gas production in China. Chinese companies are adept at drilling onshore oil and gas fields without significant foreign help and have tended to take a go-it-alone approach. In cases where underground gas reservoirs are particularly hard to reach, Chinese companies look to international companies for expertise.

“We’re able to take what we’ve learned in North America in similar reservoirs and take that knowledge to China,” Ms. Cook said.

Other foreign companies are considering investing in Chinese gas fields. PetroChina has held recent talks with France’s Total SA to jointly develop China’s Sulige natural-gas field. Ms. Cook said Shell’s Changbei investment is the largest to date by a foreign company in Chinese onshore gas production. The project fits into Beijing’s strategy of reducing air pollution in the capital city in time for it to host the 2008 Summer Games.

Ms. Cook said the plan is to have the Changbei field produce three billion cubic meters of gas a year by 2008.

Separately, a senior Shell executive said the company plans to invest around 30 billion rupees, or about $690 million, toward building a bulk cargo terminal and a container terminal at Hazira seaport in the western Indian state of Gujarat.

–Himendra Kumar in New Delhi contributed to this article.

Write to Matt Pottinger at [email protected]

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