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arabtimesonline.com: Kuwait, Shell refinery to go onstream by ’10

BEIJING, March 25, (KUNA): China’s fourth-largest oil firm Sinochem Corp will start processing Kuwait’s crude at its planned refinery in East China as early as January 2010 through a joint venture with the state-owned Kuwait Petroleum Corporation (KPC) and Royal Dutch Shell Plc, Sinochem sources said Tuesday. “We reached a deal with our Kuwaiti partner for crude supply in June 2007, and the project is subject to approval of the central government,” company sources told Kuwait News Agency (KUNA). Earlier this month, Sinochem President Liu Deshu also confirmed during the Chinese People’s Political Consultative Conference (CPPCC) that his firm has sealed the purchase agreement with the KPC.

Capacity
The refinery, under construction in the coastal city of Quanzhou in Fujian Province, is designed to refine heavy Kuwait Export Crude, they said, adding that its processing capacity will be eventually 12 million tons annually, roughly 240,000 barrel per day (bpd). The state-run Sinochem will own 51 percent stake in the joint project, with the Kuwait Petroleum International (KPI), a KPC unit that oversees its foreign operations, and oil giant Shell each holding a 24.5 percent stake, according to the sources. Upon the completion of its first phase, the Fujian refinery will initially process five million tons a year, of fuel oil. The second phase will boost the total production capacity to a full-scale of 240,000 bpd by adding a crude distillation unit. The co-investors also consider installing aromatic plants in the facility, the sources said. The first stage of the refinery has already gained provincial government’s go-ahead, while the second phase is still pending approval from the National Development and Reform Commission (NDRC). The NDRC is China’s top economic planning agency in charge of energy legislation. Both KPC and KPI offices in Beijing have declined to comment.

Sources in the NDRC have indicated that the project is currently under review and the preliminary conclusions assume swift approval of the project. There are also environment worries and some speculations within the NDRC about the necessity of having another refinery in the vicinity of a world-class integrated refining/petrochemical complex involving Fujian government, Sinopec Corp, ExxonMobil and Saudi Aramco. Located also in Quanzhou City, the mega investment will triple the capacity of the existing refinery to 240,000 bpd with significant product upgrading capability to primarily refine and process sour Arabian crude, China’s top refiner Sinopec said on its website. Sinopec, ExxonMobil and Saudi Aramco also plan a joint venture for the marketing of fuels products manufactured by the Quanzhou refinery, with eyeing operations of more than 750 service stations and a network of terminals in Fujian Province.

The deal KPC is developing with Sinochem marks the latest in a series of moves by the corporation to expand its presence in China, where demand for crude is surging. Kuwait’s crude oil sales volume to this market has surged in the past three years by six times to around 120,000 bpd, KPC’s Chief Executive Officer Saad Al-Shuwaib noted in November during his first visit to several Asian countries since assuming the post last year. The main benefit for the KPC to participate in establishing refining, petrochemical and infrastructure joint ventures in China is provided through the accompanying supply contracts for such facilities. The world’s second-largest energy consumer imported 163.17 million tons of crude in 2007, equivalent to 3.28 million bpd, up 12.4 percent from the previous year, data from the General Administration of Customs shows.

Progress
The Kuwaiti corporation is also making progress on a mammoth project with Sinopec to build a refinery and petrochemicals plant in the southern Guangdong Province, which is pending approval. If approved, the USD five billion project, also involves Dow Chemical Co of the US, will become the biggest Sino-foreign joint venture in the Chinese refining and petrochemical industry, overtaking Saudi Aramco’s $4 billion Fujian project. The Sino-Kuwaiti fully integrated complex, to be located in the Nansha District of provincial capital Guangzhou, will feature a refinery capable of processing 300, 000 bpd, or 15 million tons annually, and one million tons-per-year ethylene steam cracker. Findings of its ongoing feasibility study, jointly conducted by the KPI and the local government, are expected to be presented to the Chinese authorities for approval sometimes this year, Al-Shuwaib has said earlier.

The Sino-Kuwaiti project, however, is facing serious environmental challenges because of its location close to many populated areas such as Hong Kong and the city of Guangzhou. Zhang Guobao, vice-minister of NDRC, reportedly said at a news conference earlier this month that the Nansha project was still undergoing a feasibility study. But he noted Beijing was happy with the planned location, dismissing media reports that the project had run into trouble over environmental permits. The joint venture gained Chinese government approval in 2006 for preliminary work, but gigantic projects in the sensitive energy sector often encounter lengthy negotiations. To meet robust demand in China, in 2005, the KPC inaugurated a representative office in the Chinese capital, followed by the opening of KPI’s new office last summer.

http://www.arabtimesonline.com/kuwaitnews/pagesdetails.asp?nid=14392&ccid=12

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