Shell, BP competing for China refinery investments

The competition between Shell and BP to build refineries in China continues. Shell originally planned to participate in the 15 million-ton-per-annum (TPA) refinery project in Guangzhou in partnership with China National Petroleum and Chemical Corporation (Sinopec) (Beijing) and Kuwait Petroleum Corporation (KPC); however, BP was chosen instead. The project was approved about a year ago. A million-ton-per-annum ethylene unit attached to the refinery is now being considered, as well.

With a total investment of more than $5 billion, the project will exceed the $4.3 billion China National Offshore Oil Corporation (CNOOC) (Beijing)-Royal Dutch Shell (Shell) joint petrochemical project in Huizhou City in Guangdong Province. Construction will be complete and production will start at the refinery in 2010. Upon completion, it will process 300,000 to 350,000 barrels of crude oil a day.

BP and Shell are both quite active in seeking downstream oil projects in China. BP now holds 9.4% of the shares of China's currently largest refining and petrochemical company, Sinopec's Zhenhai Petrochemical Company. Shell holds 50% of the shares in the 800,000-TPA ethylene unit at CNOOC-Shell Petrochemical Company in Huizhou.

Though it didn't succeed in becoming a partner in CNOOC's new refinery, Shell still forges ahead with its expansion plan. Its $2.5 billion 12 million-TPA oil-refinery project is being constructed at the site of its Huizhou ethylene plant to ensure the raw material supply to this ethylene-cracking unit.

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