Kuwait-China Oil Refinery Project to Start 2012 Q1

Mayor of Zhanjiang city Ruan Risheng said construction of Kuwait's $9 billion refinery and petrochemical complex in the southern Chinese city will begin in the first quarter of next year. Ruan made remarks in a statement to Kuwait News Agency (KUNA) after the visit to Zhanjiang by Kuwaiti Consul General in Guangzhou Abdulwahab Al-Sager.

Ruan expressed gratitude to Al-Sager for his support to the project and the Kuwaiti Consulate's contribution towards its success.

The National Development and Reform Commission (NDRC), China's top economic planner, granted final approval in March for Kuwait to build a long-awaited refinery and petrochemical complex on Donghai Island of Zhanjiang in Guangdong Province.

The joint venture between Kuwait Petroleum Corporation (KPC) and Sinopec entails a 15 million-ton-a-year (300,000 barrels per day) refinery, a 1 million-ton-a-year ethylene plant and related utilities, as well as support facilities. The mayor also spoke highly of the efforts exerted by Al-sager and his deep understanding of the nature of the southern region in China through his number of visits to various cities, in addition to seeking to establish a relationship and cooperation between Zhanjiang and Ahmadi city.

For his part, Al-sager said to KUNA, "My visit to Zhanjiang city does not only aim to see developments in the oil project, but also to push economic cooperation between the two sides and promote the bilateral trade in general." The Kuwaiti diplomat also showed an interest in establishing friendship and forging sister-city agreement between Ahmadi and Zhanjiang, pledging his utmost efforts in this regard. During his visit to Zhanjiang, Al-Sager also planted a tree of Kuwaiti-Chinese friendship with Vice Mayor Chen Anming.  Europes largest oil firm Royal Dutch Shell said in December it has pulled out of talks to join the project due to "strategic and commercial considerations," bringing a chance for other international oil companies.

In September, KPI President Hussain Ismael told KUNA that the alliance will finalize its international partners only after the NDRC grants final approval for the project, and admitted KPI has been in talks with BP.

Ismael also said teaming up with international oil majors is in line with KPC's formula for building a large-scale refinery outside Kuwait, which enables KPC to reduce its risks while utilizing oil majors' know-how and worldwide experience.

With NDRC's initial approval in 2006, the refinery was originally planned for the Nansha district of provincial capital Guangzhou, but amid growing concern over the environment impact on the densely populated area, Kuwait and China agreed in May 2009 to relocate the project to much less crowded Donghai Island of Zhanjiang City.

The coastal city provides the alliance with "exceptional technical advantages, such as availability of deep water for VLCCs, good environmental conditions and excellent land condition, as well as economical attractiveness including tax incentives," Ismael said late October when KPI, together with Sinopec, signed two separate memorandum of understandings with provincial and Zhanjiang municipality governments on cooperation in the project.