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Wed 25 Jan 2012 05:51 PM

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Kuwait snaps up Total for $9bn China refinery deal

Deal would see Total take slice of Kuwait’s 50% share of oil refinery venture in China

Kuwait snaps up Total for $9bn China refinery deal
Total chief executive officer Christophe de Margerie

Kuwait
chose Total as the third partner to build a $9bn oil refinery in China, Kuwait
Petroleum Corp chief executive officer Farouk Al-Zanki said.

“We
are negotiating now with Total, and hopefully we will reach an agreement based
on a memorandum of understanding,” Al- Zanki said in a telephone interview
today from Kuwait City. “We’d like to sign it in February.”

Total
would take part of Kuwait’s 50 percent stake in the refining and chemical
venture, with the Paris-based company’s share “still to be decided,” Al-Zanki
said. China Petroleum & Chemical Corp holds the remaining 50 percent. The
complex, scheduled to start operating in 2015, will include a refinery with an
oil-processing capacity of 15 million metric tons a year, or about 300,000
barrels a day, as well as a 1 million ton-a-year ethylene plant, China
Petroleum said in November.

Kuwait
Petroleum is pushing ahead with the joint venture in southern China’s Guangdong
province and a 200,000 barrel-a-day refinery in neighboring Vietnam as part of
a strategy to expand abroad, according to Al-Zanki. Kuwait is the
fourth-biggest producer in the Organization of Petroleum Exporting Countries,
and Asia is its biggest market, accounting for 84 percent of the Gulf state’s
crude exports in 2010, according to OPEC data.

The
state-run Kuwaiti company and Japanese refiner Idemitsu Kosan each has a 35.1
percent stake in the Nghi Son refinery in Vietnam. State-controlled Vietnam Oil
& Gas Group holds 25.1 percent of the venture, and Mitsui Chemicals Inc.
has the rest.

The
partners have yet to agree on currency exchange rates to be used for the
Vietnamese project, Al-Zanki said. “There’s a team looking closely at ways and
means to secure the foreign exchange, while other financial issues are being
resolved.”

Al-Zanki
expects the partners in Nghi Son to resolve their remaining issues by the end
of February, while Kuwait Petroleum and China Petroleum are “committed” to
their joint venture and have formed a team to determine how best to proceed.

The
Kuwaiti company also plans to build an oil refinery at home, at a cost of at
least KD4bn ($14.4bn), to help meet domestic demand. The 615,000 barrel-a-day
Al-Zour plant is still awaiting final approval from the Supreme Petroleum
Council, the country’s highest decision-making body for oil policy.

Kuwait
National Petroleum, the state-run refiner, is seeking foreign companies to work
as consultants on the Al-Zour project, which stalled three years ago amid
political opposition.

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