The $15 billion mega-project which will be longer than the Great Wall of China will bring gas from Chinas less economically successful Western provinces to the rich, industrialized coastal regions around Shanghai.
While PetroChina has announced that it will raise a twelfth of the funding from the domestic A share market, the remainder will have to be financed through loans, bonds and equity participation from a foreign partner and international investors.
Deutsches role will initially be to aid in the selection of a foreign partner, with ExxonMobil, BP Amoco, Shell and Gazprom all interested. This essentially-M&A advisory role could then be followed by a more lucrative international equity offering, although Deutsche would not comment on this.
Says Deutsches head of investment banking, Frank Nash: Weve done a lot of pipeline advisory around the world and weve been marketing to PetroChina for quite some time. They liked our research on the company, our China team and our knowledge of pipelines.
The decision to mandate Deutsche will not be particularly welcome news for Goldman Sachs which led PetroChinas IPO (see FinanceAsia cover story, November 2000) and has long been regarded as the house bank to Chinas most profitable company.
If nothing else, it shows that where China is concerned, personal relationships must continue to be an important factor in winning business. Goldmans pointman on the PetroChina relationship was Lee Zhang, who ran the Beijing office. However, he decamped to Deutsche at the beginning of the year to head its Greater China team and has been working hard to build Deutsche relationships with Chinas top clients, many of which he listed while at Goldman.
Meanwhile, PetroChina reckons the project will start producing gas by 2003 and a foreign partner will be announced in the third quarter.