Kuwait in negotiations over oil refinery
By Wang Ying (China Daily)
Updated: 2005-11-11 06:28

State-owned Kuwait Petroleum Corp (KPC) said it is in talks with Sinopec, BP and Shell about building a joint-venture refinery with a daily crude processing capacity of 300,000 barrels in South China's Guangdong Province.

"The talks are expected to be finalized in the first half of next year," Hamzah Bakhash, a KPC spokesman, told China Daily on the sidelines of the Clean Technologies Conference Asia 2005 that concluded yesterday in Beijing.

Bakhash did not reveal details, such as the share structure of the joint venture or the investment involved, but said the Middle East oil producer expects to increase exports of crude oil and LPG (liquefied petroleum gas) to China.

The Guangdong joint venture may process crude oil imported from Kuwait, but that will all depend on prices, Bakhash said.

KPC, which established its Beijing representative office at the end of March, plans to double its crude exports to China to 400,000 barrels per day from the current level of 200,000 barrels in "months," the KPC official told China Daily.

Chen Ge, spokesman for Sinopec, yesterday said he was not aware of the partnership negotiations, saying only that the Beijing-based oil refiner imports crude oil from Kuwait for refining.

KPC in March signed memorandums of understanding (MOUs) with BP and Shell, looking at partnership opportunities in countries including China, BP and Shell said.

BP and Kuwait Petroleum International, a subsidiary of KPC, agreed to investigate and develop opportunities for future joint investment in China and elsewhere in Asia. They agreed to co-operate in areas such as supply, refining, distribution and marketing in China and neighbouring countries, BP said.

KPC and Shell reached an accord to explore opportunities worldwide to develop and implement joint downstream investments.

"The MOU builds upon the relationship that Shell and Kuwait have fostered over the past 50 years. We are looking at opportunities in many countries, including China," Lusha Li, corporate communications manager at Shell Companies China, told China Daily.

The Chinese Government is still encouraging foreign investment in the country's refinery business, despite a policy preventing foreign investors taking majority stakes in Chinese firms, Hu Jingyan, director of the foreign investment administration under the Ministry of Commerce, said in September.

Hu said many projects involving joint venture refinery construction were being discussed by Chinese and foreign oil companies, but he did not elaborate.

Chen Hongbing, senior broker with Singapore-based Ginga Petroleum Pte Ltd, said foreign oil companies are looking at China's surging oil demand, while their Chinese counterparts want to benefit from a secure crude oils supply.

"They (the foreign oil firms) are looking at the long term, despite the fact that China currently has a price cap on finished oil products, such as gasoline and diesel," said Chen. "But the Chinese Government is introducing more market elements to the country's refined oil market."

"Chinese oil demand has risen by around 1.6 million barrels of oil a day in the last two years, with almost 90 per cent of that increase supplied by imports. It expects demand to continue rising over the next decade," BP said in a company statement.

(China Daily 11/11/2005 page9)