Financial Times: BASF boost for Chinese pipeline: The company also failed to find foreign investors - talks with Royal Dutch/ Shell, ExxonMobil and Russia's Gazprom failed” (ShellNews.net)
By Enid Tsui in Hong Kong
Published: October 22 2004
A BASF petrochemical joint venture in China has become the biggest customer for PetroChina's West-East gas pipeline, helping to muffle critics who have questioned the viability of the $18bn project.
BASF-YPC, a $2.9bn joint venture between Germany's BASF and Sinopec, China's largest refiner, has agreed to purchase about 600m cubic metres of gas a year to power its plants when production begins in 2005. Both parties to the contract refused to disclose the value and duration of the agreement.
The pipeline, which began full operation on October 1, has so far supplied 820m cubic metres of gas. But it is hoped the long-term agreement with a multi-national venture should help to silence critics who doubt the commercial value of the pipeline project. The volume that BASF-YPC is buying remains relatively small when compared with the pipeline's capacity of 20bn cubic metres of gas a year for 30 years.
Analysts have seen the pipeline largely as a burden for PetroChina. China has been slow to take up natural gas as a fuel option. The company also failed to find foreign investors - talks with Royal Dutch/ Shell, ExxonMobil and Russia's Gazprom failed - leaving it to bear the cost of construction alone.
The 4,200km project, which stretches from the deserts of Xinjiang to Shanghai on the coast, aims to help realise Beijing's aim of having gas meet up to 10 per cent of China's energy needs by 2010.
BASF declined to give details of the per unit cost the joint venture is paying for the gas. "We didn't just consider the cost of raw materials when we chose gas. We also looked at the environmental benefits as well," it said.
BASF-YPC, formed in 2000, is expected to produce about 1.7m metric tonnes of chemicals and polymers a year.