China National Offshore Oil Company (
CNOOC), the
nation's third largest oil producer, has moved into the
petrochemical business after yesterday agreeing with the
Shell
company to build a US$4.3 billion petrochemical complex.
As
the largest foreign-funded scheme to date, the project is expected
to produce 800,000 tons of ethylene and 2.3 million tons of
petrochemicals a year after its expected completion in late
2005.
It
is a bold move by CNOOC, which used to focus on oil and gas
production, to diversify its business and latch onto the rapidly
increasing demand of China's petrochemical market, the largest in
Asia.
The company is also "actively preparing for a large refinery near
the petrochemical project" to provide production materials for it,
CNOOC President Wei Liucheng said yesterday.
The refinery, if approved by the government, will change the
domestic refinery status quo. Presently, rivals PetroChina
and Sinopec
control half of the domestic refineries.
Wei would not discuss specifics about the refinery but said it
would be a world-class facility.
He
said the "historic" petrochemical complex was an important step
forward for CNOOC to become one of the top 500 international
companies by 2005.
CNOOC has taken a 45 percent share in the Nanhai Petrochemical
Project, as it is now known, in Huizhou, in South China's Guangdong
Province. Shell has a 50 percent stake, while the Guangdong
Investment and Development Company gets the remainder.
About US$1.7 billion worth of petrochemicals from the project are
expected to be sold each year to industrial customers in Guangdong
and other coastal economic zones.
Shell said in a statement that major construction will start early
next year.
More than US$1 billion worth of contracts for the processing
plants, plant automation and project management services will be
awarded by the end of the year.
Evert Henkes, chief executive officer of Shell Chemicals Ltd, said
an expansion of the project in the future is likely but will rely
on market forces.
Henkes said it is also possible for Shell to invest in CNOOC's
proposed refinery, if it is approved.
China has a shortage of petrochemical products compared with its
booming economy, with half of the demand being satisfied by
imports.
Demand is expected to grow by up to 6 percent annually in the
coming years.
To
ease the shortage, China is working on several other huge
petrochemical joint ventures in the Shanghai Municipality and
Jiangsu and Fujian provinces.
Simon Lam Chung Kai, chief executive officer of the Nanhai
project's joint venture, said there is little competition within
the domestic market as different projects cover different market
areas.
"The production capacity still can not meet the rapid demand in
China," Kai said.
"Even with these projects commencing operation, China will still
need to import a lot."
(China
Daily November 2, 2002)