Kuwait Petroleum Corporation (KPC) has shortlisted Royal Dutch Shell and Dow Chemical as potential partners in a joint-venture Chinese refinery it aims to build with Sinopec, a KPC executive said on Tuesday.
Abdullatif Al-Houti, managing director for international marketing, said the foreign players would have minority stakes in the new refinery and petrochemical plant in southern China, with Sinopec holding 50 or 51%.
British firm BP, which had been in talks with KPC over the plant in the manufacturing hub of Guangdong province, appeared to have been ruled out.
The Nansha refinery has a planned capacity of 250,000 to 300,000 barrels per day (bpd), and while Al-Houti said it was too early to calculate investment figures, he quoted a “rule of thumb” that new refineries cost about $30,000 per barrel.
This suggested an eventual price tag of $7.5 billion to $9 billion – far more than the bill of $5 billion that has been floated in the past.
Extra cash will be needed for a petrochemical plant with annual ethylene output of one million tonnes, which Al-Houti said was a key requirement of both the Kuwaiti and Chinese sides.
Petrochemicals help ensure profitability in a market where fuel prices are tightly controlled by the government, and in recent years they have often been set at loss-making levels.
“It is a must for us, and the Chinese side agree,” Al-Houti said on the sidelines of an industry conference in Beijing.
KPC is now awaiting final approval for what would be one of the largest joint ventures in China from the National Development and Reform Commission, China’s main economic planning agency, and from the environment ministry.
“We are in talks with Shell and Dow. They are very strong candidates to be partners, and their names have been submitted to the NDRC,” he said in a presentation to the Asia Oil Distribution and Retail 2008 conference.
State-owned KPC and Sinopec, Asia’s top refiner, received preliminary government approval for the Guangdong plant in 2006, but negotiations for major projects in the sensitive energy sector can sometimes drag on for years.
KPC has said it aims to become one of China’s top five crude suppliers within three years and in 2008 alone will boost imports to 115,000 bpd from 88,000 bpd last year.
By 2015, KPC expects to supply between 500,000 and 700,000 bpd of crude to the Nansha plant and a second one in Quanzhou owned by a smaller firm, Sinochem, an executive from the firm’s overseas arm said last month.
Exxon Mobil and Saudi Aramco are also building a $5 billion refinery in Fujian province to help meet China’s fast-growing demand for oil. (Reuters)
Follow us on
