$457 Million Premium Paid for Bringing China's Pipeline Network Under One Roof

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$457 Million Premium Paid for Bringing China's Pipeline Network Under One Roof

Fri, 07/24/2020 - 18:40
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Oil refinery industrial plant at night (copyright by Adobe Stock/TTstudio)
Oil refinery industrial plant at night (copyright by Adobe Stock/TTstudio)

Facilitating Beijing's drive to consolidate China's vast pipeline infrastructure, the Politburo - the nexus of all political power in China - has created the China Oil & Gas Pipeline Network (PipeChina).  

The new company is part of the country’s efforts to allow its energy companies to focus on boosting exploration and production. Combining China’s pipeline infrastructure into one firm and opening access to this infrastructure to foreign and private producers would help the state oil and gas firms to focus on exploration at a time when China aims to increase its domestic production.

PipeChina will look over a pipeline network that’s expected to expand by 80 per cent to 240,000 kilometres by 2025.

The deal is worth $457 million (3.2 billion Chinese yuan) and is expected to be completed by September 30, 2020, Sinopec Kantons Holdings Limited said in a filing to the Hong Kong Stock Exchange.

Under the agreement, PipeChina is buying 100 percent in Sinopec Kantons’ natural gas transmission business and its core asset, the Yulin-Jinan Pipeline which is 900 kilometers long.

PipeChina is paying a 43-percent premium over the net asset value of the Yulin-Jinan Pipeline, which is a good sign that other assets would also be bought at a premium, analysts told South China Morning Post.  

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