TOP Chinese oil refiner Sinopec Corp plans to issue 20 billion yuan (US$2.6 billion) of long-term bonds - its largest - to help fund development of one of the country's largest gas projects.
The money to be raised will be part of a budget of 65.7 billion yuan Sinopec has planned for the development of the Puguang natural gas field in southwestern Sichuan Province.
The domestic bond issue was approved yesterday by shareholders at Sinopec's annual general meeting in Beijing, but it still needs the go-ahead from the government, Sinopec said.
Sinopec announced the Puguang gas discovery last year. The field boasted proven reserves of 356 billion cubic meters, becoming China's second largest, at the end of last year and Sinopec expected the figure could rise to 550 billion cubic meters by the end of 2008.
Sinopec is building a 22-billion-yuan, 1,702-kilometer long pipeline with annual transport capacity of 15 billion cubic meters to carry Puguang gas to central and eastern coastal regions, including Shanghai.
The field will have a annual capacity to pump 10 billion cubic meters when Sinopec starts output late next year. Output in Puguang could later rise to 15 billion cubic meters, or a quarter of last year's national output.
Based on current gas price, return on investment for the Puguang project is estimated at 14 percent, Sinopec said. Its shares fell 1.1 percent to HK$8.08 (US$1.03) yesterday in Hong Kong.
The latest bond issue follows Sinopec's US$1.5 billion overseas convertible bond issue last month which was used to buy out some listed units, and its five billion yuan domestic corporate bond sale, which started early this month, to fund construction of some petrochemical projects.
Meanwhile, a Dow Jones report quoting Sinopec board secretary, Chen Ge, said the company is studying to boost capacity in its five refineries along the Yangtze River as part of efforts to reduce costs.
The five, in Anqing, Changling, Jingmen, Baling and Wuhan, are capable of producing around five million tons of oil products a year each.