PetroChina Revisits Plan to Auction Mega Gas Pipeline Arm

PetroChina, the country's biggest oil and gas producer, is revisiting a plan to auction its multi-billion dollar natural gas pipeline division, and could now sell it to an affiliate, according to a report.

Selling PetroChina Eastern Pipelines to PetroChina United Pipelines, 50% owned by PetroChina, will help the energy giant retain control over China's national gas grid and raise cash to fund oil and gas exploration, Reuters reported.

The move will also save PetroChina the trouble of shortlisting investors wealthy enough to absorb a large asset like Eastern Pipelines, whose net asset value is estimated at between $4.7bn (£2.8bn, €3.5bn) and $6.3bn.

United Pipelines has a total registered capital of 40bn yuan ($6.46bn).

A final decision to sell is expected in the fourth-quarter of 2014.

Pursued by the news agency, PetroChina's spokesman, Company Secretary Mao Zefeng, refused to comment.

Beijing Disappointed

Abandoning the auction will throw Beijing's plans, to open up the corrupt state-dominated energy sector to domestic private investors, out of gear.

PetroChina controls more than 80% of the nation's natural gas grid and some private players have complained that the monopoly hurts their business.

"It's almost a done decision to let the joint venture... acquire Eastern Pipelinee. Few private investors also have the financial appetite to swallow such a massive asset," a Beijing-based energy industry executive told Reuters.

"It's a possibility that PetroChina actually would like to see. They are moving in that direction," a financial industry executive briefed on the matter told the news agency.

PetroChina said in May it will auction Eastern Pipelines, which controls the twin west-to-east, cross-country gas pipelines in China.

PetroChina and its parent firm, China National Petroleum (CNPC), are at the centre of one of the biggest corruption probes to have hit the Chinese energy sector in years.

PetroChina United is a joint venture PetroChina set up in 2013 with Taikang Asset Management, which owns a 30% stake, and Beijing Guolian Energy Industry Investment Fund, which owns 20%.