Sate-owned energy giant China Petroleum & Chemical Corp. (Sinopec) said Monday it would raise US$3.3 billion in fresh capital from the sale of a major pipeline stake.
The state-owned oil-and-gas company said in a filing with the Hong Kong stock exchange that it planned to sell a 50 percent stake in its Sichuan to East China gas pipeline to two other state-owned companies, part of a wider reform push by the government, the Wall Street Journal reports.
The planned capital injection by Sinopec marks one of the government’s bigger steps to date to try to improve performance of China’s ailing oil and gas sector.
Yet, the fact that both the investors — China Life Insurance Co. and a unit of State Development & Investment Corp. — are also owned by the government reflects Beijing’s desire to maintain a tight grip over the strategic sector.
The Sinopec gas pipeline is massive, stretching 1,400 miles over eight Chinese regions to send as much as 12 billion cubic meters of natural gas each year from supply sources in central China to the country’s eastern metropolises such as Shanghai.
The project is part of a critical infrastructure network whose success will help determine if the world’s second biggest economy can meet its goal of boosting natural gas supplies in the coming years.
For Sinopec, the sale was needed as persistently low global oil prices have weighed on its earnings.
The company said in the statement Monday that proceeds from the pipeline sale would help fund growth of its natural gas business. Sinopec earlier announced it would sell the pipeline in August.
Under the deal, China Life Insurance will hold a roughly 44 percent stake in the pipeline company, while State Development & Investment — a sprawling investment holding firm whose assets already include ports and railways — would own about 6 percent.
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