The new pipeline is expected to provide Shanghai with 1.9 billion cubic meters of natural gas a year upon completion in 2010.

Sinopec would invest 63.2 billion yuan (8.2 billion U.S. dollars) in the project, which included the development of the Puguang gas feild in Sichuan, the source of the pipeline, the report quoted unnamed insiders as saying.

As one of China's five largest gas fields, Puguang had proven reserves of 356 billion cubic meters by the end of last year and would produce 15 billion cubic meters a year from 2009, said the report.

The pipeline would have a total length of 2,800 kilometers, with its main stem running 1,647 kilometers from Puguang to Shanghai and four branch lines extending to Chongqing and provinces of Henan, Sichuan and Jiangsu.

As Shanghai's demand for natural gas soared from four million cubic meters in 2003 to 1.9 billion in 2005, China's leading oil and gas producers have all looked at the eastern metropolis as a major market.

China's first west-east gas pipeline, which was built by China National Petroleum Corp. and went into operation in 2004, carries 1.2 billion cubic meters of gas annually to Shanghai from the Tarim Basin in Xinjiang.

The capacity was expected to reach 1.7 billion cubic meters in 2008, said the report.

Meanwhile, China National Offshore Oil Corp. is conveying annually 600 million cubic meters of gas to Shanghai from Pinghu, a gas field in the East China Sea.

From 2009, Shanghai was also likely to receive a 25-year gas supply from Malaysia, with annual supply expected to grow from 1.47 billion to four billion cubic meters in 2012, said the report.

Although China's natural gas output would reach 94 billion cubic meters in 2010 from last year's 58.6 billion, the country would still need imports to fill a gap of 16 billion cubic meters a year, said the report.