Shell and CNOOC proceed with $4.3bn deal
news.ft.com
By Matthew Jones in London
Published: November 1 2002 10:02 | Last Updated: November 1 2002 10:02
Royal Dutch/Shell, the Anglo-Dutch oil group, and joint venture partner China National Offshore Oil Corporation on Friday said they would proceed with a $4.3bn petrochemicals complex in southern China, thought to be the largest foreign investment finalised on the mainland.
The decision comes 14 years after negotiations first started and is the latest in a series of Chinese deals by large western oil companies such as BP and ExxonMobil.
Shell will become the leading foreign investor in the Chinese petrochemicals market when the plant opens in 2005. The project, known as Nanhai, is expected to cut China's large petrochemical import bill and is part of CNOOC's strategy to diversify away from its core offshore oil exploration business.
Shell and CNOOC have completed a 20-month "definition phase" of the project during which they conducted an environmental and social impact assessment, finalised design engineering packages and tendered construction contracts.
The groups said contracts worth $1bn for process plant, project management and plant automation would be let by the end of the year, with work expected to start early next year.
Evert Henkes, chief executive of Shell Chemicals, said the project continued Shell's aim of building a world-class petrochemicals business serving major industrial customers. Wei Liucheng, president of CNOOC, China's third largest oil company, added that the plant would contribute to the economic development of China's east coast by creating "a pool of talent with an international mindset".
Nanhai is located in the Daya Bay economic and technical development zone of Guangdong Province. Once completed the plant will produce an annual 2.3m tonnes of products such as ethylene and propylene, generating up to $1.7bn in sales. The products will primarily be used to supply customers in Guangdong and the high-consumption areas of China's coastal economic zones.
Shell will have a 50 per cent share of the project while CNOOC holds 45 per cent and the Guangdong Investment and Development Company holds 5 per cent. About half of the $4.3bn cost of the scheme is being financed directly by the equity partners, with the remainder raised from project finance.
Earlier this year Shell announced a further $600m of investments in China's offshore oil industry and in the construction of 500 petrol stations in the eastern province of Jiangsu. The group also signed a joint venture with PetroChina, Gazprom of Russia and ExxonMobil of the US to build a $8.5bn gas pipeline from the Tarim Basin in north-west China to Shanghai, a distance of 4,000km.
Shell's London-listed shares slipped 2.2 per cent in early trading, erasing some of Thursday's 4.5 per cent gain, to 402p. |
