China's 18 billion dollar west-to-east natural gas pipeline will be completed this year despite operational and management hiccups, a senior Chinese government official said Monday.
"The progress in the west-to-east gas project has gone very smoothly," Zhang Baoyu, vice minister of the State Development and Reform Commission, told a press conference.
"Last December 31 the eastern section was completed and gas is already being supplied to Shanghai."
He admitted though that problems existed with a failure by PetroChina and a consortium of Western energy companies to reach a joint venture agreement on operation and management of the 3,900 kilometres (2,340 mile).
The project though is moving ahead at full steam with completion of the 2,400 kilometer western section of the pipeline set to be completed by October this year, with commercial operation coming as early as December 30, he said.
The mammoth project, which starts in the Tarim basin in China's westernmost Xinjiang region, ends in Shanghai and is part of efforts to tap some 650 billion cubic meters of natural gas in the basin.
"As far as a large-scale joint venture project for the pipeline is concerned, after two years of commercial negotiations with overseas partners, at present no agreement has been reached," Zhang said.
"The main reason is that both sides have not agreed on commercial terms of the joint capital project, for example differences exist over the duration of the project and the allocation of resources."
Under a framework agreement signed in July 2002, PetroChina was to own half of the pipeline, while a Western consortium made up of Shell, Exxon Mobil and Russia's Gazprom would each hold 15 percent, while Chinese refiner Sinopec would have a five percent stake.
Although both sides had hoped for a final agreement last year, negotiations have been fraught with differences, even as construction of the pipeline has gone forward.
On the down-stream end of things, Zhang said that so far 20 contracts for a total of 6.96 billion cubic meters of gas had been signed by 20 cities around Shanghai and in central Anhui and eastern Zhejiang provinces.
He said the government would continue to encourage PetroChina to continue negotiations with foreign energy companies to reach a joint venture deal on the pipeline.
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