Sino-Russian oil pact to emerge from Putin visit
Thursday, November 28, 2002
biz.scmp.com
SAMUEL YEUNG
PetroChina, China's No 1 oil producer, is expected to strike a US$1.7 billion pipeline deal with Russia's second-largest oil company Yukos during Russian President Vladimir Putin's visit next week.
The planned pipeline - an estimated 2,400km, stretching from eastern Siberia to China's Daqing - will supply 6.8 per cent of China's estimated oil consumption in 2005, as well as give new momentum to PetroChina's growth, according to HSBC Securities.
"We speculate that a deal could be announced as early as this weekend during President Putin's last visit to China before President Jiang Zemin's term ends in March 2003," said HSBC analyst Gordon Kwan.
During Mr Putin's three-day visit, begining on Sunday, the two leaders are expected to discuss subjects including co-operation in the energy sector.
Mr Kwan expected that under the deal PetroChina and Yukos would build a pipeline from the Russian city of Angarsk to China's oil centre Daqing. The pipeline was expected to bypass Mongolia but follow its border due to Chinese security concerns.
It would supply 400,000 million barrels of oil per day to northern China, Mr Kwan estimated.
As Russia is eager to earn foreign exchange by selling oil, Mr Kwan expected it could allow the Chinese oil giant to get an upper hand in the deal.
"Russia's desperation could see Yukos conceding a sizable stake in its Siberian fields to PetroChina," Mr Kwan said.
He expected PetroChina would take an upstream stake in the Tomskneft and Yurubchenskoye oil fields, where the British oil and gas giant BP could merge as a strategic partner.
As a result, he expected the pipeline could deliver a 15 per cent internal rate of return to the Chinese company, higher than the industry average of 12 per cent for a similar project.
Yesterday, PetroChina's spokesman Mao Zefeng confirmed the company was in talks with Yukos but declined to say whether it had arranged to meet Mr Putin during his visit. However, "we are confident of striking a [pipeline] deal", Mr Mao said.
Mr Kwan said the deal would be positive for PetroChina's share price. He estimated the proposed pipeline could boost PetroChina's net oil sale volume and earnings before interest, tax, depreciation and amortisation by 8 and 6 per cent respectively.
While reckoning that the share should be worth HK$2.40, Mr Kwan set a target price of HK$2.
After rising 0.67 per cent in morning trading, shares of PetroChina ended unchanged at HK$1.48 yesterday.
Lawrence Lau, an analyst at Taiwan-based brokerage Core Pacific-Yamaichi, was more cautious.
"It is too early to say whether PetroChina could benefit from the deal because we have yet to know the details of it," Mr Lau said.
Issues such as how PetroChina and Yukos would share the construction investment as well as the pipeline fees would affect the profitability of the project, he said
He set a target price of HK$1.88. |
