Negotiations with Shell and ExxonMobil end amid talk the energy giant has sufficient finances to complete the project PetroChina has ended a preliminary agreement with foreign oil companies on the west-to-east gas pipeline project, after two years of talks failed to yield a unified investment strategy. The differences are believed to have involved the distribution of gas reserves as well as the length of the joint venture contract, which would affect the rate of return for the foreign firms. Analysts also say PetroChina may no longer see the need to use foreign capital and expertise to complete the strategically sensitive project. Spokesmen at Royal Dutch/Shell and ExxonMobil - leaders of two foreign consortiums involved in the talks - last night confirmed that PetroChina had notified them of the termination on Monday. A spokesman from PetroChina was unavailable for comment. Shell, ExxonMobil and Gasprom of Russia led three consortiums that signed a framework agreement with PetroChina in July 2002, under which they were to take a combined 45 per cent stake in the building of the US$5.2 billion, 4,000km gas pipeline. Including development of upstream gas fields and downstream distribution facilities, the project's investment cost has been estimated at more than US$20 billion. The pipeline - China's longest - is a priority project for Beijing as it is considered central to efforts to raise usage of cleaner fuels and the transport of vast natural resources from China's sparsely populated western regions to the rapidly growing coastal markets. Since the pipeline's eastern section was completed last year, speculation has been rife that the talks had broken down over profit-sharing terms and rates of return. While officials at the negotiating companies insisted that the talks were continuing, PetroChina officials were saying that the company would have no problem completing the project alone. 'We all regret that we have been unable to reach an agreement ... the talks have not made much progress this year,' said Shell's Beijing-based spokesman. 'We look forward to other future co-operation opportunities.' Gordon Kwan, China energy specialist at Kingsway Securities, said PetroChina had sought foreign participation in 2001 because it wanted to share investment costs and project risks. 'In 2001, most analysts forecast that oil prices would average US$20 a barrel this year,' he said. 'With the sharp rise in oil prices, PetroChina is flush with cash.' Recent gas discoveries in western and northern China may have made PetroChina more reluctant to share profits with foreign parties, Mr Kwan said. PetroChina's proven gas reserves have grown 13.74 per cent over the past two years to 41.06 billion cubic feet, according to its annual report filed with the New York Stock Exchange. Most of the increase came from the Changqing field in Shaanxi province and Tarim Basin in Xinjiang. PetroChina's gas production rose 14 per cent last year to 1.89 billion cubic feet per day. The eastern section from Shaanxi to Shanghai started operations last year, while the western section from Xinjiang to Shaanxi should be ready in October.