China and Myanmar have agreed to build a $2.5 billion oil-and-gas pipeline project connecting a port on the Bay of Bengal and the southern Chinese city of Kunming, the Nikkei newspaper reported.

China National Petroleum Corp. will hold a 50.9 percent stake and manage the project and Myanmar Oil & Gas Enterprise will own the rest, the newspaper said, citing a copy of the contract between the two governments obtained by the Nikkei.

The partners will build a $1.5 billion oil pipeline and $1.04 billion gas line, the Nikkei said. Oil and gas storage tanks will also be built near the Myanmar port of Kyaukpyu, the report said.

China will import crude oil from the Middle East and natural gas from Myanmar's offshore fields via the pipelines, the newspaper said. The project will provide China with an alternative to importing fuel through the Straits of Malacca and cut transportation times by seven days, Nikkei said.

To contact the reporter on this story: Shigeru Sato in Tokyo at ssato10@bloomberg.net.

(Bloomberg, Nov 18, 2008)