China Petroleum and Chemical Corp.(Sinopec) on Tuesday started issuing bonds worth 20 billion yuan (2.67 billion U.S. dollars) to finance the construction of a 2,800 kilometer natural gas pipeline from southwestern Sichuan province to Shanghai.
All the 20 billion yuan, along with Sinopec's investment of 25.07 billion yuan, will be injected into the 63 billion yuan project. The pipeline started construction in August and is expected to provide Shanghai with 1.9 billion cubic meters of gas annually upon completion in 2010, the company said.
However, it didn't provide details about how it would raise the remaining 18 billion yuan.
The bonds will be issued at a par value of 100 yuan each exclusively to domestic institutional investors within three days, Sinopec said in a statement posted on its Website.
The issue breaks down to 8.5 billion yuan with a term of five years and an annual interest rate of 5.4 percent and 11.5 billion yuan with a term of 10 years and an interest rate of 5.68 percent.
The oil giant is also planning to issue 30 billion yuan in convertible bonds with warrants entitling the purchase of its shares. Some of the proceeds from the convertible bonds will be channeled into the project, the company said earlier this year.
The project includes the development of the Puguang gas field in Sichuan, the source of the pipeline and one of China's five largest gas fields, with proven reserves of 356 billion cubic meters as of the end of last year.
As Shanghai's demand for natural gas soars, China's top oil and gas producers have all looked at the eastern business hub as a major market.
China's first West-East gas pipeline, which was built by China National Petroleum Corp. and went into use in 2004, carries 1.2 billion cubic meters of gas annually to Shanghai from Xinjiang.
Its capacity is expected to reach 1.7 billion cubic meters next year.
China National Offshore Oil Corp. is also annually transporting600 million cubic meters of gas to Shanghai from Pinghu, a gas field in the East China Sea.
Although China's natural gas output will reach 94 billion cubic meters in 2010 from last year's 58.6 billion cubic meters, the country still needs imports to fill a gap of 16 billion cubic meters annually.
Source:Xinhua
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