Chinese Disposal Will Reap $1bn Profit for Bp

BP yesterday published plans to dispose of its minority holding in PetroChina which has trebled in value over the past four years and should reap net profits of more than $1bn (£540m).

BP holds a similar stake in another Chinese firm - Sinopec - and there is now speculation this will be on the sale block before long.

BP was quick to dismiss speculation that it had turned all its attention to Russia, pointing out it still intended to press ahead with $3bn worth of investment in China over the next five years.

The move sent BP shares up 2% to 442.5p, helped by broking houses encouraging investors to switch out of Shell following its shock announcement of a 20% cut in reserve figures.

BP bought a 2% stake in PetroChina in 2000 mainly as an act of goodwill to help the Beijing government bring state-owned assets to western stock markets.

PetroChina shares have surged 150% over the past 12 months and BP has been repaid financially and politically, having won approval for a range of schemes in China.

"Our equity investment has been very successful and we believe now is an appropriate time to divest the shares," said BP China president Gary Dirks.

The company declined to say whether it would sell its 2% holding in Sinopec, which has also rapidly escalated in value. "We will keep the situation under review but no decisions have been taken," insisted a BP spokesman in London.

BP bought 3.5bn shares in PetroChina at the flotation of 10% of the company in 2000. It paid HK$1.28 and is expected to sell at between HK$3.6 and HK$3.7. It has also benefited from PetroChina dividends.

The British group will continue with plans to open 500 petrol stations in Guangdong province as part of a joint venture with PetroChina and is awaiting government approval for another 500 in the Zhejiang region in partnership with Sinopec.

BP is also developing China's first liquefied natural gas import terminal near Shenzen in Guangdong and is a partner in a similar scheme to bring gas from Indonesia to Fujian.

The company's biggest single investment is a half share in a $2.7bn petrochemical complex near Shanghai called Secco. BP has invested $4bn in China since the 1980s.

Shell is also a big investor in the country with its own investments in Sinopec with which it is also developing 500 petrol stations around China.

Shell shares were down a further 1% yesterday at 367.75p after falling 7.5% on Friday. It has been rocked by media speculation about the long term future of chairman Sir Philip Watts.

His position was undermined further by comments in yesterday's Wall Street Journal from Lynn Turner, a former chief accountant at the securities and exchange commission in New York.

"A 20% restatement of proven reserves is a humungous error. For a company like Shell to have missed its proven reserves by that much is not an oversight. It's an intentional misapplication of the SEC rules," she argued.

There are now expectations of a crackdown on Shell and other oil companies to ensure such figures are presented more accurately including the possibility of outside auditors.

Shell insists it acted in good faith and uncovered the mistake after its own internal review.