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Bloomberg: Cnooc Parent, Shell Borrow $2.9 Billion to Reduce Finance Costs

By Winnie Zhu

June 27 (Bloomberg) — China National Offshore Oil Corp., the nation’s biggest offshore oil explorer, and Royal Dutch Shell Plc borrowed $2.9 billion from banks to reduce the cost of financing their petrochemical venture in southern China.

The venture at Nanhai in Guangdong province borrowed $1.3 billion and 12.4 billion yuan ($1.6 billion) from a group of domestic banks to pay loans arranged in 2003, Liu Junshan, a spokesman for China National Offshore Oil, said today.

The $4.3 billion chemical plant at Daya Bay was the biggest Chinese joint venture with a foreign company when the investment was agreed in 2002. The plant, equally owned by China National Offshore Oil and Shell, started producing 2.3 million metric tons of chemicals including ethylene and propylene annually last year.

“The move will cut the venture’s financing cost by a lot,” Liu said by telephone from Beijing, without giving a specific figure. “So far we don’t have any more financing or expansion plans for the venture.”

The group of banks includes Industrial & Commercial Bank of China Ltd., Bank of China Ltd. and China Construction Bank Corp.

China National Offshore Oil, parent of overseas-listed Cnooc Ltd., started construction on a 19.3 billion yuan refinery, the company’s first, in December 2005. The plant is near the Nanhai chemical facility and will process as much as 12 million tons a year of crude oil into fuels starting June 2008 and will supply naphtha to the joint venture with Shell, Europe’s biggest oil company by market value.

Ethylene, typically made from the crude distillate naphtha and gas, is a key ingredient in plastic packaging, water bottles and synthetic fibers. Propylene is used in compact discs and bullet-proof windows.

To contact the reporter on this story: Winnie Zhu in Shanghai at [email protected] .
Last Updated: June 26, 2007 23:11 EDT

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