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Shell Plots Shanghai Listing

Mark Kleinman November 11, 2010 3:16 AM

The oil giant Royal Dutch Shell is drawing up plans to list its shares on mainland China’s biggest stock exchange as part of efforts to forge deeper ties and expand its operations in the country, I have learned.

I am told that Shell has appointed China International Capital Corp (CICC), one of China’s leading investment banks (in which the Wall Street bank Morgan Stanley is about to sell a significant stake), to assist it with the prospective share offering in Shanghai.

The news that Shell is looking at listing in Shanghai when reforms allow such a move comes in the same week that it signed a co-operation agreement with PetroChina, a state-owned oil company, to explore energy projects in Canada and China.

The Anglo-Dutch oil major is among several overseas multinationals (including HSBC, the London Stock Exchange and The Coca-Cola Company) which have been considering a move to list in Shanghai ahead of long-pledged reforms by the Chinese authorities to allow foreign companies to do so. The reform is seen as a litmus test of the seriousness with which China is attempting to transform Shanghai into one of the world’s leading financial centres.

Shell declined to comment, but two people close to the company have told me that it is serious about progressing its plans when regulators reform the listing rules. Senior Chinese officials have indicated that those reforms could arrive as early as next year.

Nonetheless, Shell executives will not be holding their breath for the day that investors can begin buying renminbi-denominated shares in the company.

Chinese regulators have consistently delayed opening its stock exchanges to overseas companies, frustrating the efforts of (in particular) HSBC, which has openly stated its desire to become the first foreign company to secure a mainland listing.

I’ve been told by several people close to HSBC that the bank was uncomfortable with a demand that it should restate its earnings under Chinese accounting rules as part of any listing process. That request is now thought to have been diluted.

Yet as I pointed out in a post during my visit to Beijing earlier this week, a reiteration by George Osborne, the Chancellor, and Wang Qishan, the Chinese vice premier, of the desire to open China’s capital markets was little more than a statement of the obvious.

BP was also expected to secure some welcome news in the form of an exploration agreement with CNOOC during David Cameron’s visit to China this week. Although it has not yet been signed, people close to BP say that it will be completed “in due course”.

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