Kuwait-China Refinery Expects Final Approval by End of 2010

State-run Kuwait Petroleum Corporation (KPC) aims to obtain Chinese government approval for the Kuwait-Sino joint venture project to build a mega refinery and petrochemical complex in southern China's Zhanjiang City by the end of this year, KPC's top official said on Monday.

"We are expecting to get final approval from the National Development and Reform Commission (NDRC) by the end of this year," KPC CEO Saad Al-Shuwaib, who is on his Asian tour at present, told Kuwait News Agency (KUNA), adding that the investors still hope to begin commercial operations as early as 2013. NDRC is China's top economic planning agency.

The USD nine billion project with Asia's top refiner Sinopec includes a refinery of 300,000 barrels per day, ethylene cracker with the capacity of one million ton per year and a retail network in and around Guangdong Province, where the plant will be located.

The joint venture is currently undertaking a public consultation in Zhanjiang over the plan late February, the final major hurdle before submitting the Environmental Impact Assessment (EIA) and the Project Application Report (PAR) to the Ministry of Environmental Protection for Beijing's final nod.

OPEC-member Kuwait will supply all the crude to the refinery, which could be China's biggest joint venture in its kind. Kuwait Petroleum International (KPI), KPC's international refining and market unit, has been representing Kuwait in talks with the Chinese side.

Participation

Asked about British oil major BP Plc's possible participation in the project, Al-Shuwaib answered, without elaborating, "We are in talks with some international oil companies. It may take time to decide our partner, as there are many options." KPC and Sinopec will each hold an equal 50 percent stake in the joint venture, with KPC planning to give 20 percent of its share to their potential international partners.

Europe's 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.