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Sinopec Sells Part of Pipeline Business To Boost Clean Energy Investment

Pipeline Fix

Beijing’s newest move to boost investments in clean energy infrastructure will lead Sinopec Corp. to sell up to half of its premium natural gas pipeline business to investors, according to a new report by Reuters.

The company—China’s second largest oil and gas firm—said its board had reached an agreement to sell half of its interest in the Sichuan-East China pipeline project as part of a larger divestment plan.

The value of the target assets, or the timeline for their sale, have so far not been revealed, though the release detailing the move said the funds would be used “as a platform to introduce capital publicly.”

China boasts 90,000 km of gas grids, but the fields are not enough to quench the country’s needs as one of the world’s largest energy consumers. Currently, coal, which, upon consumption, emits twice as many greenhouse gases as natural gas, is China’s preferred energy source.

The pipeline now up for sale cost Sinopec $9.45 billion to build and connects the southwestern province of Sichuan to Shanghai—a city 1,370 miles away.

The line came into operation in 2010 and carries 12 billion cubic meters of natural gas, equivalent to six percent of the country’s annual gas consumption.

Sinopec’s domestic rival, PetroChina, announced a similar plan over six months ago as a prelude to Beijing’s planned industry reforms, especially regarding oil and gas pipelines.

PetroChina and Sinopec have held strategic dominance over pipeline assets in the past. The new reforms will break up the companies’ infrastructural advantage and also allow the state to cut transportation costs.

"It's a good time for Sinopec to recoup at least part of its investment over the years and finance more pipeline capacity building while still able to maintain a controlling stake," Li Yao, of the Beijing-based consulting firm SIA Energy, said.

By Zainab Calcuttawala for Oilprice.com

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