An employee at a PetroChina Co Ltd gas station in Nanjing, capital of Jiangsu province, alters oil prices. [Photo/China Daily]

Energy sector revamp gathers momentum as China Reform Holdings agrees to $2.4b deal

PetroChina Co Ltd, the country's biggest oil and gas producer, is selling a half stake in its subsidiary Trans-Asia Gas Pipeline for 15.5 billion yuan ($2.4 billion) to strengthen its balance sheet amid weak oil and gas prices.

The divestment, already approved by its board, is also expected to speed up the government's reform of the energy sector, as it looks to spin off State-owned oil and gas pipelines into independent businesses.

Shares in PetroChina dropped 0.11 percent to 8.97 yuan on Thursday in Shanghai.

The stake is being sold to a unit of the Beijing-based China Reform Holdings Corp, a State-owned asset management company.

PetroChina's profit dropped 81 percent to 5.2 billion yuan during the first three quarters of this year, its lowest since 2007.

China National Petroleum Corporation, PetroChina's parent, controls 80 percent of the country's natural gas pipeline network and storage systems.

But the company is under huge pressure to meet profit targets set by the government, as falling oil prices squeeze profits at many energy companies.

Liu Yijun, a professor at China Petroleum University, said the move marks a further step toward spinning-off of oil and gas assets of CNPC.

"PetroChina will gain cash flow through the deal, but what the company really wants is further adjustment and reorganization from upcoming reforms.

"The government will eventually split off its oil and natural gas pipelines," he said.

Liu said the move will also help spread CNPC's risk, as the Trans-Asia gas pipeline involves overseas interests too.

The pipeline starts at Turkmen-Uzbek border city of Gedaim and runs through central Uzbekistan and southern Kazakhstan before reaching Horgos in the Xinjiang Uygur autonomous region.

In a separate filing to the Shanghai Stock Exchange, PetroChina also revealed it has agreed to merge subsidiaries Kunlun Energy Co and PetroChina Kunlun Gas Co.

Kunlun Energy, which is 58.33 percent owned by PetroChina, expects the acquisition to help it focus on LNG distribution and further restructure the businesses.