CNPC said to seek creation of single gas firm to compete with rivals
China National Petroleum Corporation, the nation's largest energy producer, is seeking to combine units to create a single gas company to compete with private rivals, before an inflow of Russian fuel at the end of the decade, according to two company officials familiar with the project.
The plan under consideration would be for CNPC's Hong Kong- listed unit Kunlun Energy to buy unlisted PetroChina Kunlun Gas, the two people said. Kunlun Energy is CNPC's main commercial gas supplier on the mainland, while Kunlun Gas distributes fuel to households in more than 100 Chinese cities. Both companies are housed within PetroChina, state-owned CNPC's largest listed unit.
Kunlun Energy could pay more than US$3 billion for Kunlun Gas, according to one analyst's estimate. The asset injection is being discussed for the second half of the year although the precise timing has not been decided, the company officials said.
Shi Yan, an analyst at UOB Kay Hian in Shanghai, said Kunlun Gas could be worth between 10 billion (HK$12.55 billion) and 20 billion yuan, based on a multiple of one or two times the value of its assets of about 10 billion yuan.
CNPC's strategy is to concentrate spending on higher margin energy exploration and production, rather than so-called downstream assets. By folding Kunlun Gas into a listed company, the arrangement would also align with the government's pledge to expand the influence of the free market on the economy.
CNPC is positioning itself to take advantage of its US$400 billion deal with Russian supplier Gazprom in May, the largest contract in natural-gas history. Under the accord, Russia will supply China with 38 billion cubic metres of natural gas a year from as early as 2018.
Kunlun Gas was established in Beijing in 2008 with capital of six billion yuan, according to its website. Its distribution business has an annual capacity of more than five billion cubic metres.