China National Petroleum Corporation (CNPC), the country’s biggest oil company has sold 50% of its interest in the Trans-Asia Gas Pipeline Co. for $2.3-2.4b, far below the market price, to China Reform Holdings Corporation, a state-run asset management firm, Radio Free Asia reported.
The move comes as a result of a drop in revenues that both CNPC and its Hong Kong-listed unit PetroChina have seen in 2015, The Financial Times informed. In addition, the sale is considered a step in the right direction for CNPC and the government-controlled energy sector aiming to demonopolize, restructure, and open up to investments. However, The Financial Times wrote that despite asset reshuffles, China remains reluctant to open oil and gas industry to private investment. Instead, as China Daily reported, China seeks to create a unified natural gas operator to withstand private rivals to state-run companies. The intended goal is likely to form a pipeline monopoly to encourage the development of the domestic natural gas industry, as the state’s priority in energy policy, The Financial Times added.
The Trans-Asia project costs are reported to have exceeded initial evaluation at the level of $4.8b, as the cost of the first strand of the pipeline – constructed between 2007 and 2009 – had already been put at as high as $7.3, according to data cited by Radio Free Asia. PetroChina specified that a value of the pipelines could be as much as $43b in total.