The construction of a US$8 billion east-west gas pipeline in China is progressing. The country's largest oil firm, PetroChina, dismissed a report that the project had been delayed by disagreements among the partners.

"The negotiation between PetroChina and the foreign consortium for the project is underway and the pipeline construction is going smoothly and on schedule," PetroChina said in a statement. "Discussions of the take-or-pay contracts with the users of the west-east pipeline gas are progressing."

The Financial Times said yesterday there was no end in sight to discussions over investment terms for the pipeline, citing Philip Watts, chairman of Anglo-Dutch oil giant Royal Dutch/Shell.

The newspaper quoted Watts as saying a deal would be struck but his company "had to be very dogged about the terms expected because you're putting billions of dollars of Shell's money into it".

Under a framework agreement signed in July 2002, PetroChina owns half interest of the pipeline, and Royal/Dutch Shell, Exxon Mobil and Russia's Gazprom each hold 15 per cent. China's second largest oil firm Sinopec Corp holds 5 per cent.

PetroChina has said the pipeline is scheduled to begin pumping gas at the end of this year, but it has yet to ink formal agreements with foreign partners to invest in the project, and has not signed gas sale agreements with users.

PetroChina said last week it was in talks with 35 potential users and had signed supply deals with Henan and Anhui provinces, but was waiting for the government to set a gas price.

Earlier there were media reports that PetroChina may proceed alone with the project if a deal cannot be finalized by the end of this year.

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