China Petroleum & Chemical Corp, supplier of two-thirds of the nation's auto fuels, will sell 30 billion yuan (US$4.2 billion) of bonds to help build a cross-country pipeline and ethylene plants.

 

Sinopec, as Beijing-based China Petroleum is known, will start selling the bonds with warrants on Wednesday, the company said yesterday.

 

The bonds have a six-year term, the company said.

 

China was encouraging companies to issue bonds to reduce reliance on bank loans and provide investors with an alternative to the nation's stock market.

 

Sinopec needs to fund a capital spending bill that was forecast to jump 38 percent last year as energy demand surges in the world's fastest-growing major economy, Bloomberg News said.

 

Sinopec will use the bond sale's funds to build a pipeline to transport natural gas from the southwestern province of Sichuan to Shanghai.

 

Sinopec projects 2007 capital spending at 110 billion yuan.

 

Sinopec said it was also building two ethylene plants, each with a capacity of one million metric tons a year, in the cities of Tianjin and Zhenhai.

 

Another ethylene plant will be built in Wuhan.

 

The company will issue 300 million bonds incorporating warrants that can be converted into Shanghai-traded stock at a ratio of one share for every two warrants.

 

Sinopec started building the pipeline from the Puguang field in September to meet rising demand for cleaner-burning fuels.

 

The 1,700 kilometer link will cost 62.7 billion yuan.

 

Puguang held 356 billion cubic meters of gas reserves by the end of 2006, Sinopec President Wang Tianpu said.

 

The company may be able to increase the reserves by about 100 billion cubic meters a year, said Chen Deming, vice chairman of the National Development and Reform Commission.

 

(Shanghai Daily February 18, 2008)