Employees monitor natural gas transmission facilities in Zibo, East China’s Shandong Province. File photo: VCG

Sinomart Development, a wholly-owned subsidiary of Sinopec Kantons Holdings, has agreed to sell 100 percent of the equity interests in Sinopec Yu Ji Pipeline Co, to China Oil & Gas Piping Network Corp (PipeChina), for 3.22 billion yuan ($460.2 million), according to a document released by Sinopec Kantons Holdings on Tuesday. 

The deal is expected to be completed on September 30. The move marks the beginning of PipeChina's foray into acquiring pipeline assets from China's three biggest oil companies, which is expected to promote greater pipeline interconnections, analysts said. 

Sinopec Yu Ji Pipeline Co is mainly engaged in the natural gas pipeline transmission business through its only core asset, Yulin-Jinan Pipeline, said the document. The pipeline starts in Yulin, and ends at Jinan, passing through four provinces including Shaanxi Province, Shanxi Province, Henan Province and Shandong Province.

The initial designed gas transmission capacity of the Yulin-Jinan Pipeline was 3 billion cubic meters per year. Its transmission capacity increased to 4 billion cubic meters per year and is expected to further increase to 5 billion cubic meters per year, said the document.

Yulin-Jinan Pipeline mainly provides natural gas transmission services for Daniudi Gas Field of China Petroleum & Chemical Corporation (Sinopec Corp). In recent years, the production capacity of the gas field was maintained at about 3 billion cubic meters per year, said the company.

Sinopec Kantons Holdings explained that the disposal of the Yulin-Jinan Pipeline will enable it to focus on projects with higher returns, and enable the Yulin-Jinan Pipeline to fully utilize its transmission capacity and realize better value.

In addition to improving the financial position and replenishing the working capital, the company will use the net proceeds to further develop its crude oil jetty and storage business with the aim of shaping the company into a world-class international petrochemical storage and logistic company, according to the document.

The principal businesses of the company and its subsidiaries include the provision of natural gas pipeline transmission services, the operation of crude oil and oil products terminals and their ancillary facilities and the provision of global logistics services, said the company.

Notably, Qingfeng Line, a supporting facility of "Wen 96" gas storage of Sinopec Corp, owned by Yu Ji Pipeline Company, will be sold to Sinopec Yu Ji Pipeline Branch Company, rather than PipeChina. Qingfeng Line is located at Puyang city, Central China's Henan Province, starting at Nanle Sub-station, passing through Qingfeng Sub-station, and ending at Liutun Compressor. The major functions of Qingfeng Line include natural gas transmission to end users and peak adjustment through transmission to gas storage facility. 

Sinopec Corp is an indirect controlling shareholder of Sinopec Kantons Holdings, holding approximately 60.33 percent of the issued share capital of the company.