(Yicai Global) July 24 -- China’s two state-owned oil and gas giants have agreed to sell their pipelines and storage facilities to China Oil and Gas Piping Network, formed last year to help streamline and promote the development of the country’s energy infrastructure, for CNY390 billion (USD55.6 billion).

PetroChina and China Petroleum and Chemical, also known as Sinopec, will sell the assets to PipeChina after more than seven months of negotiations, the two Beijing-based firms said yesterday. The transfer should wrap up by Sept. 30, after which PipeChina will have registered capital of CNY500 billion.

PipeChina was set up last December to consolidate oil and gas resources under one umbrella company, so as to facilitate investment in and the building of a nationwide trunk pipeline network as well as gas storage and peak-shaving facilities.

Under the deal, PetroChina will get a majority stake of 29.9 percent in the new entity, worth CNY149.5 billion, in exchange for selling its assets for CNY268.7 billion. The remainder will be paid in cash and PetroChina is expected to make CNY45.8 billion from the deal.

Sinopec and its affiliates will hand over their assets for CNY122.7 billion, CNY70 billion of which will be paid for in shares and the rest in cash. That will give Sinopec 9.42 percent of equity, while its natural gas unit will own 4.58 percent. Sinopec expects a pre-tax profit of CNY36.6 billion from the transaction.

Shares of PetroChina [SHA: 601857] fell 0.9 percent today to end the week at CNY4.50 (USD5.70) each, while Sinopec [SHA: 600028] lost 0.7 percent to CNY4. The benchmark Shanghai Composite Index tumbled almost 3.9 percent.

Editor: Kim Taylor