China Joint Venture & Equity Stake in Petrochina
BP Amoco PLC
23 March 2000
BP AMOCO AGREES MAJOR CHINA JOINT VENTURE
AND TAKES EQUITY STAKE IN PETROCHINA
Following the significant rise in its Asian gas reserves as a result of the
imminent combination with Atlantic Richfield (ARCO), BP Amoco today announced
that it plans to form a gas marketing joint venture with PetroChina aimed at
supplying the rapidly growing energy markets of eastern China.
It said the two companies intend to cooperate in building infrastructure,
potentially including an LNG terminal, and to supply imported and domestic gas
to the regions around Shanghai and the Yangtze River Delta. Gas currently
meets just two per cent of China's energy needs, but this is projected in
government plans to increase to between seven and eight per cent by 2010.
The gas project is part of a strategic alliance agreed in principle today
between BP Amoco and PetroChina which also includes a preliminary agreement to
build a fuels marketing business in China's coastal provinces with the
prospect of further expansion into other regions.
Including some existing sites, the companies aim to build or acquire up to 150
service stations in the first year of operation, and maintain that momentum
towards building a significant retail presence within five to seven years.
They will also consider joint expansion in lubricants and aviation fuels. BP
Amoco currently has joint-venture operations at 17 airports in China.
The alliance additionally allows BP Amoco involvement in the West-East China
gas pipeline and, longer term, the potential to market gas from East Siberia
where BP Amoco has an interest in the giant Kovyktinskoye field. Both these
options are subject to feasibility studies and appropriate approvals.
BP Amoco separately said it will take 20 per cent of the shares currently
being offered, up to a maximum of $1 billion, by PetroChina through its
Initial Public Offering.
Describing China as 'an immensely important market for us', BP Amoco chief
executive Sir John Browne said: 'This alliance with PetroChina has the strong
support of the Chinese government. We regard it as a powerful strategic step
which will help us expand our operations in China across our business
streams.'
Gary Dirks, BP Amoco's executive president for China, said: 'In particular,
this agreement gives us access to China's gas markets which promise massive
growth in demand over the next decade as the country moves from coal to
cleaner fuels. This fits well with the very significant gas position we will
have in Asia after completing our combination with ARCO.
'Outside the US, China is the world's largest energy market and is enjoying
strong economic growth which will be further enhanced by the current de-
regulation of its internal markets. PetroChina is vigorously pursuing the same
efficiencies as BP Amoco and has the same strong growth agenda. I have no
doubt our investment and this alliance will be greatly to our mutual benefit
and the benefit of China.'
Notes to Editors:
PetroChina is China's largest oil and gas company with operations in oil
and gas exploration and production, refining and marketing, natural gas and
chemicals. As of September 30, 1999, it had estimated reserves of
approximately 10.8 billion barrels of crude oil and approximately 24.3
trillion cubic feet of natural gas. In the nine months to September 30, 1999,
it produced 583.3 million barrels of crude oil and 324.7 billion cubic feet of
natural gas for sale. As of end-1998, it owned and operated approximately 95
per cent of China's onshore natural gas pipelines.
A registration statement relating to the shares of PetroChina has been filed
with the United States Securities and Exchange Commission, but has not yet
become effective. PetroChina's shares may not be sold nor may offers to buy be
accepted prior to the time the registration statement becomes effective. This
press release shall not constitute an offer to sell or the solicitation of an
offer to buy nor shall there be any sale of PetroChina's shares in any state
or country in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state
or country.
BP Amoco is one of the world's largest energy and petrochemicals groups.
Following its combination with ARCO, which is subject to US Federal Trade
Commission approval, it will have investments in China of some $1.5 billion,
the largest of any foreign oil company.
Following its combination with ARCO, BP Amoco will have some 35 trillion
cubic feet of gas resources in the Asia-Pacific region, including China,
Australia, Indonesia, Malaysia and Thailand. Also included is BP Amoco's
interest in the giant Kovyktinskoye field in East Siberia which is currently
the subject of a feasibility study to export gas by pipeline to north and
north-east China.
China is Asia's largest energy market but currently uses only about 20
billion cubic metres of gas a year, equal to two per cent of its energy mix.
This is projected in government plans to grow to between seven and eight per
cent by 2010 - a rise in annual consumption to over 100 billion cubic metres.
The management of the joint venture will be shared between the partners
and organised and operated in line with other BP Amoco business unit
disciplines, and accountable to both PetroChina and BP Amoco.
The agreements described in this press release are subject to the
execution of definitive agreements between the parties, and to all relevant
government authorisations and approvals.
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