Shell China Venture Close To Reality

A senior Chinese oil official involved in the US$6 billion refinery and chemical complex plan told reporters that Beijing was poised to give its stamp of approval before the end of 1996.

From what I know, it will be approved very soon by the Chinese government, the official said by telephone in Beijing.

It will probably be this year, said the official.

The petrochemical complex, planned for Huizhou, in southern Chinas booming Guangdong province, has been on the drawing board since the late 1980s. A feasibility study report was presented to Beijing in February 1994.

Shell plans to hold 50 per cent in the complex and China National Offshore Oil Corp (CNOOC) 20 per cent, while the Guangdong provincial government, China Merchants Holding Company and state refiner SINOPEC each would have 10 per cent.

 

The Chinese side and Shell have discussed this for several years. Both sides have spent a lot of effort, money, said the official, who declined to be named.

If successful, the Shell plant would be the second joint venture refinery in the country to involve foreign participation. The 100,000 barrel per day Dalian refinery in northern China began trial runs in October. Frances Total holds 20 per cent of that facility along with various Chinese partners.

Indications that fresh developments on the long-stalled project might soon emerge came in September when a top Shell official met Chinese Premier Li Peng to discuss the companys future cooperation with China.

The project figured highly on the agenda when John Jennings, chairman of Shell Transport and Trading Co, met the Chinese premier in Beijing, oil sources earlier disclosed.

That clearly was a sign that both sides were positive about the project, said a Shell spokesman by telephone.

Beijings positive stance was spurred by the overriding concern that the country needed to increase its oil production and refining capacity to meet rising oil demand, the Chinese oil official said.

Chinas oil consumption is forecast to explode in the next few years, fuelled by economic reforms.

Experts estimate refined oil product consumption would grow at an average yearly rate of 5.7 percent during 1995-2000, reaching 4.1 million bpd in 2000 and 5.3 million bpd by 2005.

To meet rising demand, China would need to e the United States as the worlds biggest economy within the next generation and foreign oil companies are keen to tap its domestic market by building new refineries.

Shells project has faced countless hurdles since the early 1990s, from high costs to strained bilateral relations.

The project was kept on tenterhooks in early 1993, when Sino-British ties plunged to a low over Hong Kong after Governor Chris Patten introduced democratic reforms in the colony, which reverts to Chinese rule in mid-1997.

Chinas credit-tightening policy in 1994 and centralisation of the countrys oil policy in the same year erected further hurdles for the costly joint venture project.

This project was initially thought to be gunned down because it was too costly. But now, they want to go ahead with it, a source with state refiner SINOPEC said by telephone.

At the same time Shell started a long-drawn-out fight for more access to the booming domestic market in China.

Some Chinese officials are known to be reluctant to giving foreign oil companies toeholds in the massive market while others preferred foreign investments be channeled into upgrades of older refineries.

A Shell spokesman in Hong Kong said the company was hopeful of a speedy decision from Beijing.

Details of the joint venture have still to be worked out and the petrochemical complex, which would take at least four to five years to complete, would be ready only after 2000, Chinese oil sources said.