OREANDA-NEWS. April 08, 2013. Late last year China National Petroleum Corp the largest oil and gas producer in the country met with several insurance companies about selling stakes in natural gas transmission projects.

Several sources close to CNPC said that “The expected size of financing is nearly CNY 80 billion and both sides will meet again soon.”

CNPC wants to sell stakes in Line 1 and Line 2 of the West East Gas Pipeline.

Although CNPC has assets of more than CNY 3 trillion its average annual investments total about CNY 300 billion. Most of its investments are in medium and long term projects such as purchases of foreign oilfields and refining facilities. This means the company's working capital current assets minus current liabilities is strained.

In March 2012 CNPC's working capital was minus CNY 79.7 billion its financial report shows. This indicates the company does not have adequate cash flow.

Also the company's asset liability ratio has climbed in recent years. At the end of the Q3 of 2012 the figure was 45.41% its financial report shows.

Because of this CNPC is eager to expand its channels of financing. Besides preparing to sell stakes in natural gas transmission projects the company will also use 3 other companies it controls Kunlun Trust Co Ltd, Bank of Kunlun and Generali China Life Insurance Co Ltd to raise funds.

However it remains unclear if CNPC can reach agreement with potential investors, chiefly China Life Insurance Co and Taikang Life Insurance Co Ltd on the pipeline deals.

There are 2 reasons for this. The first is that insurance companies demand higher returns from their equity investments than CNPC is offering. Another is whether the China Insurance Regulatory Commission will approve the deals.