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Shell Cuts Back on Chinese Projects

THE WALL STREET JOURNAL

APRIL 14, 2009, 10:55 P.M. ET

BEIJING — Royal Dutch Shell PLC is delaying or dropping some alternative-energy projects in China as too costly, given current oil prices, executives said Tuesday.

Lim Haw-Kuang, executive chairman of Shell Companies in China, said in Beijing that because of the economic downturn, it decided to postpone a joint venture with Shenhua Group, China’s top coal producer and parent of China Shenhua Energy Co., to turn coal into liquid fuel.

Shell had conducted a feasibility study with Shenhua to build a coal-to-liquid plant in the country’s western Ningxia Autonomous Region. Shenhua has been independently pursuing coal-to-liquid projects with its own technology in the country’s Inner Mongolia region, but the collapse of oil prices and China’s scarcity of water resources have made many of these projects unviable.

Mr. Lim said coal gasification — turning coal into gas, often for use as a feedstock for making chemicals — has been a strong driver of Shell’s growth in China. It has reached 20 licensing deals in recent months with Chinese companies to use Shell technology. He didn’t name any of the companies.

Shell executives said they have also abandoned a foray in northern China into oil shale, a costly and technologically challenging type of oil to produce.

Separately, Shell confirmed it was talking to potential Chinese partners about a joint bid to develop oil fields in Iraq, CEO Jeroen van der Veer said Tuesday.

Shell Chief Financial Officer Peter Voser, in Beijing to meet with government officials and company executives and expected to take over soon as chief executive, on Tuesday said the company is working on restarting the Soku liquefied-natural-gas plant in Nigeria “sooner rather than later.”

Violence in the fossil-fuel rich Niger Delta has forced Shell to shut down part of its oil and natural-gas production in the west African country.

Write to Shai Oster at [email protected]

Printed in The Wall Street Journal, page B4

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