Shanghai is seeking foreign investment in a three billion yuan (about HK$2.81 billion) project to build a city-wide arterial gas network. The 330km network to be built by state-owned Shanghai Gas Networks will distribute natural gas from Xinjiang and the East China Sea to homes and factories. Last week, PetroChina signed a deal with foreign oil giants on construction of the 140 billion yuan, 4,000km pipeline that will carry gas from Xinjiang to Shanghai. The first gas could reach Shanghai in 2004 and the project be completed in 2005. The Xihu field in the East China Sea will supply gas to Shanghai as early as 2004. Shanghai Gas Networks will build two terminals to receive the gas as the first part of the project, the Shanghai Daily said. A company official said Shanghai Gas Networks was in talks with foreign oil giants about investing in the arterial gas network. 'Nothing has been decided yet,' she said. Shanghai Gas Networks would supply gas to the city's three gas companies, all state-owned, for sale to consumers. Shanghai had not yet set the price for gas supplied through the city-wide network, the official said. PetroChina has tentatively set the price for gas from the west-east pipeline at 1.29 yuan per cubic metre. Shanghai is shifting away from coal as its main fuel source in favour of gas to help reduce pollution. Industry officials estimate 600,000 Shanghai households use gas, much of it bottled. The city is considering building a liquefied natural gas (LNG) terminal, similar to a project under construction in Guangdong, Shanghai Daily said. China is shifting towards gas to reduce reliance on overseas crude oil because of concerns over energy security. A desire to reduce pollution is also behind the drive, analysts say. Beijing has planned three big gas projects: the west-east pipeline, the Guangdong LNG terminal and another pipeline to link northern and southern China. Coal accounts for 70 per cent of China's energy mix, but some analysts forecast natural gas will rise to an 8 per cent share by 2010, up from 3 per cent now.