PipeChina pays $6bn for Chinese LNG, gas assets

China's national pipeline operator PipeChina is taking control of more natural gas assets, consolidating its ownership of the country's midstream infrastructure.

PipeChina will pay a combined 40.9bn yuan ($6.25bn) to Hong Kong-listed Kunlun Energy for controlling stakes in the 6mn t/yr Dalian LNG import terminal and Beijing Pipeline, which operates a major gas pipeline in north China. Kunlun is the listed natural gas arm of the country's biggest upstream producer state-controlled PetroChina.

PipeChina will buy Kunlun's 75pc stake in Dalian LNG, leaving the remaining 25pc owned by Dalian Port and Dalian Construction Investment. The terminal, in Liaoning province, is one of the biggest import facilities in north China.

The pipeline company is also taking a 60pc stake in Beijing Pipeline, which operates the 60bn m³/yr capacity Shaanxi-Beijing natural gas pipeline network. The other 40pc stake is owned by local distributor Beijing Gas.

The transactions extend PipeChina's operational control of the country's oil and gas pipeline infrastructure and LNG import facilities. PipeChina started operations on 1 October, following the transfer of Yn391.5bn of assets from PetroChina and fellow state-controlled firms Sinopec and CNOOC earlier this year. PetroChina, Sinopec and CNOOC all hold minority stakes in the company.

PipeChina already controlled eight LNG terminals before the latest deal with Kunlun. The transfer of Dalian LNG and the Shaanxi-Beijing pipelines to the company had been expected. PipeChina is expected to control 10 of China's 22 LNG import terminals, including the under-construction 3mn t/yr Diefu North facility in Shenzhen, giving it around 32mn t/yr of capacity once all the terminals under construction are completed.

The firm was conceived as part of a scheme to "open up the upstream and downstream and regulate the midstream" — the latter considered a natural monopoly — by 2020. It is designed to break the stranglehold of state-owned oil producers on oil and gas transportation, allowing potentially lower-cost, third-party supply to enter the market.

Kunlun plans to focus on developing its city-gas business and sales of LNG as a transport fuel following the transaction, which is due to close by 31 March 2021.

By Kevin Foster