Royal Dutch/Shell Group will run China’s second-largest natural gas field as part of a $5 billion investment plan that would make the Anglo-Dutch company the dominant foreign gas producer in the country’s north. Shell will run Kela-2 and four other fields for two years, and may buy a 45 percent stake in the assets from PetroChina Co., the country’s biggest gas producer. Shell agreed in December to buy the same share in the 46 billion yuan ($5.6 billion) pipeline that will take the gas across China to Shanghai. Analysts predict development costs of at least $5 billion. Shell and rivals Exxon Mobil Corp. and BP Plc are jostling for a slice of China’s gas market, where demand is expected to quadruple to account for 8 percent of China’s total energy supply by 2010. China’s dominant offshore gas producer, CNOOC Ltd., said Shell may invest $400 million in the country’s biggest offshore gas field. By operating the fields in the Tarim Basin in the northwestern province of Xinjiang, Shell has the right to choose contractors and appoint venture partners and may earn more from the venture than as an equity partner. After two years, the right to operate the fields would return to PetroChina. Shell will have to share the cost of finding and developing the fields if it takes a stake. The Tarim fields and pipeline are part of an $18 billion project run by PetroChina that includes distribution of the fuel in eastern cities such as Shanghai. PetroChina said earlier it hopes to sign a so-called framework agreement with Shell by June to meet a deadline to begin operating the pipeline, China’s second-largest infrastructure project after the Three Gorges Dam, in the first-half of 2004. The original plan had been to start in the second-half of 2003. Shell said its talks with PetroChina are progressing but it hasn’t set a date for signing a binding agreement. PetroChina also operates China’s biggest gas field in Inner Mongolia.
