PetroChina sells gas pipe­line stake to Kun­lun for $2.9 bil­lion

The Pak Banker - - Company& -

BEI­JING: PetroChina Co. agreed to sell its stake in a gas pipe­line op­er­a­tor to sub­sidiary Kun­lun En­ergy Co. for 18.9 bil­lion ($2.9 bil­lion) to help make fuel dis­tri­bu­tion the main busi­ness of the Hong Kong-listed oil pro­ducer.

Kun­lun En­ergy will buy the 60 per­cent stake in PetroChina Bei­jing Nat­u­ral Gas Pipe­line Co., ac­cord­ing to a state­ment to the Hong Kong stock ex­change yes­ter­day. Bei­jing Gas Group Co., a unit of Bei­jing En­ter­prises Hold­ings Ltd., owns 40 per­cent.

Shares of Kun­lun En­ergy rose as much as 3.2 per­cent to­day on spec­u­la­tion the com­pany will ben­e­fit from ris­ing de­mand for gas in Bei­jing, where the city govern­ment fore­casts con­sump­tion will in­crease 17 per­cent this year. The oil pro­ducer's stock has more than quadru­pled since PetroChina agreed to buy a ma­jor­ity stake in Au­gust 2008 and turn Kun­lun into a gas dis­trib­u­tor.

"The ac­qui­si­tion of the Bei­jing pipe­line op­er­a­tor will take Kun­lun's gas busi­ness to a new level and con­trib­ute to its earn­ings growth," Grace Liu, an an­a­lyst with Guo­tai Ju­nan Se­cu­ri­ties Co., said by tele­phone from Shen­zhen. "The deal will have very limited im­pact on PetroChina, af­fect­ing less than 1 per­cent of earn­ings."

China, the world's biggest pol­luter, wants to triple the use of cleaner-burn­ing gas to about 10 per­cent of en­ergy con­sump­tion by 2020. Kun­lun En­ergy, which op­er­ates 11 oil­fields in China and over­seas, ex­pects the bulk of its sales to come from gas by 2012, ac­cord­ing to Chair­man Li Hualin on June 10.

Kun­lun En­ergy said on Oct. 11 that it won a bid to buy a 75 per­cent stake in Dalian LNG from PetroChina for 2 bil­lion yuan. In May, Kun­lun said it will pay 500 mil­lion yuan for a share in PetroChina LNG Jiangsu Co. Kun­lun plans to ac­quire more as­sets from PetroChina, China Daily said on Dec. 24, cit­ing Chair­man Li.

"PetroChina wants to fo­cus on up­stream ex­plo­ration and pro­duc­tion and Kun­lun will do down­stream nat­u­ral-gas dis­tri­bu­tion," Yukkei Lee, a Hong Kong-based an­a­lyst at Core Pa­cific Ya­maichi, said by tele­phone. "We ex­pect more of such as­set in­jec­tions into Kun­lun En­ergy next year."

Shares of Kun­lun En­ergy fell 2.7 per­cent to HK$12.08 at 3:44 p.m. lo­cal time, as the bench­mark Hang Seng In­dex dropped 1.1 per­cent af­ter China raised in­ter­est rates to tame in­fla­tion. PetroChina de­clined 2 per­cent to HK$9.73. Bei­jing En­ter­prises re­treated 1.4 per­cent to HK$47.20.

Kun­lun En­ergy didn't say in the state­ment how it would fund the ac­qui­si­tion of the pipe­line op­er­a­tor, formed in 1991 by PetroChina's par­ent China Na­tional Petroleum Corp. and the Bei­jing mu­nic­i­pal govern­ment to trans­port gas from the north­west­ern prov­ince of Shaanxi to the cap­i­tal. For­merly known as CNPC Hong Kong Ltd., Kun­lun En­ergy said in Jan­uary that it may spend as much as HK$10 bil­lion ($1.3 bil­lion) on gas projects this year. PetroChina owns 50.75 per­cent of the com­pany.

First-half net in­come gained al­most four­fold to HK$1.25 bil­lion ($161 mil­lion) as crude oil prices re­bounded and sales of nat­u­ral gas in­creased, Kun­lun En­ergy said in Au­gust. Ful­lyear profit may more than dou­ble to HK$2.56 bil­lion, the me­dian es­ti­mate of six an­a­lysts in a sur­vey com­piled by Bloomberg shows. -Bloomberg

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