PetroChina ready to sell more of its pipeline assets

PUBLISHED : Tuesday, 13 May, 2014, 1:13am
UPDATED : Tuesday, 13 May, 2014, 1:13am

Oil and gas giant PetroChina unveiled a plan to sell its entire stake in some sections of its west-to-east natural gas pipelines, worth some 39 billion yuan (HK$49 billion), in the second pipeline assets disposal in a year.

PetroChina is increasingly willing to sell down midstream assets

Analysts said the sale will help the energy giant re-allocate resources from mid-stream distribution to more lucrative upstream oil and gas exploration and production, and answer Beijing's call for state-backed giants in monopolistic sectors to invite private firms to participate or invest in their projects and assets.

"It shows PetroChina is increasingly willing to sell down mid-stream assets that are less strategic," said Sanford Bernstein senior analyst Neil Beveridge.

The move also shows it is receptive to calls by Beijing for state firms to become more market-oriented and more efficient. By selling 100 per cent of some pipelines, PetroChina will lose control over which customers they will serve, paving the way for a reform Beijing is pushing for previously captive pipelines to be opened to third-party usage.

PetroChina said in a statement that it will inject parts of the first and second west-to-east gas pipelines that link gas sources from northwest China to the eastern and southern coastal markets, into a new firm called PetroChina Eastern Pipelines. It will be auctioned off at a yet-specified assets exchange on the mainland. Such an exchange is not a stock exchange, but a platform for state-owned companies to dispose of assets.

The assets to be injected had a net asset value of 29 billion yuan at the end of last year, as audited by accountancy KPMG Huazhen. China Enterprise Appraisals estimated a net asset value of 38.95 billion yuan, based on the replacement cost method that estimates the cost at which it takes a firm to replace an asset.

This means PetroChina can at least book a gain of 9.95 billion yuan, which could be higher if it sells for more than 38.95 billion yuan, Beveridge said.