PETROCHINA Co. is reconsidering a plan to auction off its multi-billion dollar natural gas pipeline unit, and could instead sell it to an affiliate, said sources who were briefed on the matter by the Chinese energy giant.

    Selling PetroChina Eastern Pipelines Co. to the affiliate, 50 percent owned by PetroChina, would enable China’s largest energy producer to maintain control over the national gas grid as well as raise cash to fund oil and gas exploration.

    But scrapping the auction would pose a setback to the government’s plans to open up the State-dominated energy sector to domestic private investors to improve competition and rein in corruption.

    PetroChina controls more than 80 percent of China’s natural gas grid, and some privately owned domestic gas companies have complained this monopoly hurts their business.

    “It’s almost a done decision to let the joint venture... acquire Eastern Pipelines,” said a Beijing-based energy industry executive. “Few private investors also have the financial appetite to swallow such a massive asset,” the executive added.

    A financial industry executive, who was also briefed on the sale, added: “It’s a possibility that PetroChina actually would like to see. They are moving in that direction.”

    PetroChina’s spokesman, Mao Zefeng, declined to comment. Analysts expect PetroChina to make a final decision on the sale in the fourth quarter.

    The potential buyer of Eastern Pipelines is PetroChina United Pipelines Co. — a 50-50 joint venture PetroChina set up last year with a domestic insurance firm and an investment fund that counts numerous non-State institutions among its investors, the sources said.

    Gas pipelines generate the steady, long-term returns favored by deep-pocketed financial investors such as insurers and funds. (SD-Agencies)