New Chinese Pipeline Firm Makes First Acquisition
China's newly-established oil and gas pipeline operator, PipeChina, has announced its first acquisition, agreeing to buy a infrastructure-owning subsidiary of state oil firm Sinopec for yuan 3.22bn ($460mn).
PipeChina will take over Sinopec Yulin Pipeline, the owner of the 900-km, 4bn m3/yr Yulin-Jinan gas pipeline running between the Shaanxi and Shandong provinces in eastern China, Sinopec said in a stock exchange filing on July 22. It carries gas from Sinopec's Daniudi field in Shaanxi. The transaction is due to be closed on September 30.
Sinopec said the divestment would allow it to focus on projects with higher returns, while enabling the pipeline to fully utilise its transmission capacity. Daniudi only flows 3bn m3/yr of gas.
Revenues at Sinopec's gas transmission business have fallen steadily over the last three years, reaching HK$852mn ($110mn) in 2019. The company said its profitability has been hurt by a shift to a unit-based pipeline transmission distance billing model, from an earlier "one province, one price" system.
Sinopec said the capacity of the Yulin-Jinan pipeline was due to be expanded to 5bn m3/yr, after a second compressor is added, without saying when this expansion would be completed.
PipeChina was set up in December after years of negotiations, to serve as a national oil and gas pipeline operator. It will take control of the pipeline assets of China's big three oil companies – Sinopec, CNPC and Cnooc – and ensure third-party access to their capacity.