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UK Enters Chinese Pipeline Controversy. Oil Investment Minister Urges Beijing to Examine Environmental and Social Impact as Protesters Target BP Amoco.

[Financial Times. February 7, 2001.]


Richard Caborn, UK trade minister, has urged China to provide answers to criticisms made by non-governmental organisations campaigning to force BP Amoco to sell its stake in China's largest oil company.

Mr Caborn, who is visiting China, said yesterday he was encouraged by the responses of Shi Guangsheng, his Chinese counterpart, to suggestions that Beijing should conduct and publicise studies on the environmental and social impact of a controversial pipeline.

BP Amoco is not involved in the pipeline project. But pro-Tibet activists, who oppose its construction through ancestral Tibetan lands, say the UK oil giant should nevertheless be targeted because of its 2.2 per cent stake in PetroChina, the Chinese company that is building it.

The Free Tibet Campaign, a London-based pressure group, has gained enough support to file a shareholder resolution calling for the sale of BP's 2.2 per cent stake in PetroChina at its annual general meeting in April. If passed, the resolution would represent a serious blow to BP's attempts to expand its operations in the Chinese market.

BP paid Dollars 578m for a 2.2 per cent stake in PetroChina, which listed in New York and Hong Kong in April last year, and stands to gain participation in several future joint ventures on the strength of its shareholding.

So far, Beijing has failed to address the specific complaints of non-governmental organisations over the pipeline, which will cost Rmb2.5bn (Pounds 200m) and run for 950km from Sebei in the north-western province of Qinghai to Lanzhou to the east. Now, Mr Caborn said, that could change.

"There is a willingness to compromise on impact studies on social and environmental issues," Mr Caborn said of his meeting with Mr Shi. "Where they are not willing to compromise is on the political issues."

It remains to be seen, however, whether PetroChina is willing to undertake internationally-supervised environmental and social impact studies in the area where construction of the pipeline is already well under way. Some analysts said the company may feel obliged to do so because its share price would almost certainly be hit if BP Amoco divested.

Even if environmental and social impact studies are undertaken and publicised, they may not be enough to still the complaints of the pro-Tibet lobby, which opposes the pipeline on political as well as social and environmental grounds.

One of the Free Tibet campaigners' complaints is that the pipeline will help China consolidate its control over the region.

Qinghai and Gansu lie to the north of Tibet, which China annexed in 1950. It is now intent on throwing open the resource-rich region to foreign investment and development to bring the area into the mainstream of the Chinese economy.

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