China's need for energy to feed its booming economy has seen a string of prominent law firms advise on one of the country's major projects, an US$11bn gas pipeline stretching across Central Asia to China.
Clifford Chance's Geraint Hughes represented China Development Bank as the mandated lead arranger for the financing, while Baker & McKenzie's Barry Cheng acted for the borrowers and Freshfields' Robert Lonergan advised the Uzbek sponsor.
The deal, which will see the development of a 1,818km pipeline to deliver 30 billion cubic metres of natural gas from Turkmenistan to China via Kazakhstan and Uzbekistan, was realised in 2006 when the late Turkmen president Saparmurat Niyazov and Chinese president Hu Jintao signed an agreement of cooperation between the two countries.
China National Petroleum Corporation, the lead operator of the project, has also signed agreements with Uzbekistan and Kazakhstan, giving 50% stakes for their parts in the deal.
China is said to be curbing its energy dependence on the Middle East and increasingly moving towards Central Asia and Russia. Turkmenistan is one of the former Soviet Union's most gas-rich nations.
"Central Asia has significant natural resources and is a likely destination for further investment from China and India, as well as continued investment from Russia," said Hughes.
Baker & McKenzie's Cheng agrees.
"China is on friendly terms with the countries in this region and these countries welcome significant investments from China," said Cheng. "As these deals are strategically important to China, we will continue to see not only substantial equity investments from Chinese investors in the energy sector of these countries, but also substantial financing from PRC banks to finance these projects."
Cheng said that the multi-jurisdictional aspect of the deal, covering English, Uzbek, Kazakh, and PRC law was one of the challenges of the transaction.
"The transaction involves jurisdictions with vastly different legal systems and foreign exchange control regimes. A major challenge that had to be overcome was to create a viable local security structure and a project cash flow retention and conversion / remittance mechanism that would be satisfactory to the parties concerned."