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Shell Withdraws From Sinopec, Kuwait Refinery Project

CNNMoney.com

December 03, 2009: 04:24 AM ET

(Adds quotes from Kuwaiti official, details of project, other possible partners)

BEIJING -(Dow Jones)- Royal Dutch Shell (RDSA.LN) is no longer involved in talks on joining China Petroleum and Chemical Corp. (SNP), known as Sinopec, and Kuwait Petroleum Corp. in a major refinery project in China, opening the way to other international oil companies to join the venture.

“Due to strategic considerations, we decided not to pursue the opportunity,” Shell spokeswoman Li Lusha told Dow Jones Newswires in Beijing Thursday.

An official with KPC in Kuwait confirmed that “Shell is no longer in the project.”

“Shell has pulled out. The reason is strategically, they want to focus on the upstream process,” Hussain Esmaiel, president of KPI, told Zawya Dow Jones by telephone.

KPI oversees KPC’s international downstream marketing operations and represents Kuwait in talks with potential partners.

A spokesman for Sinopec declined to comment.

State-run KPC and Sinopec Corp. have a memorandum of understanding to build a 300,000-barrel-a-day refinery and a petrochemical complex in Guangdong province in Southern China that will produce one million metric tons a year of ethylene and are waiting for formal Chinese government approval to go ahead.

In late September, Esmaiel said Shell and U.S.-based Dow Chemical Co. (DOW) were still considered candidates and that KPI had recently launched initial talks with the U.K.’s BP PLC (BP) about joining the China project, the Kuwait News Agency reported at the time.

“We understand that BP is interested in this project and location and BP has done some surveys and evaluation of the Zhanjiang site…We will look at their proposal and consider it,” Esmaiel told KUNA.

“…our project is a major downstream project, so it’s no longer part of their (Shell’s) strategic focus on upstream projects,” Esmaiel said Thursday.

“Shell pulling out has no impact on our plans to proceed with this project, which will be finished in 2014. We are now in advanced talks with another IOC ( international oil company) which is very interested in joining the project,” he said.

“An IOC will join us as a partner of KPI and KPC. Sinopec will still have 50%, while KPI has 50%, so the new IOC will take a new percentage in the KPI stake,” he said, declining to be more specific.

It’s hoped that the project, which will cost an estimated $9 billion, will get approval from the Chinese government by the end of January, a source close to the negotiations said.

Kuwait will supply all the crude oil for the project, in China’s southern Zhanjiang city.

The joint venture model is similar to that used in another major refinery and petrochemical project, in China’s Fujian province, which went into commercial operation in November.

That venture involves Sinopec Corp. and the Fujian provincial government, which together own 50% of the venture, while Exxon Mobil Corp. (XOM) and Saudi Aramco hold 25% each.

Wan Xu in Beijing and Tahani Karrar In Dubai contributed to this article; Dow Jones Newswires; 8610-84007799; [email protected]

  (END) Dow Jones Newswires
  12-03-09 0424ET
  Copyright (c) 2009 Dow Jones & Company, Inc.

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