Kuwait favours BP ahead of Shell as partner in China refinery plan

Kuwait favours BP ahead of Shell as partner in China refinery plan
Reuters / Published: September 25, 2007, 23:45

Kuwait City: Kuwait wants to drop Royal Dutch Shell as a partner and is instead considering BP in a project to build a $5 billion oil refinery in Guangdong in China, Kuwait's state news agency Kuna reported yesterday.

Shell had hoped to gain a foothold in the domestic fuel market of the world's second-largest energy consumer through the Guangdong plant, after an attempt to take a share in another refining project failed last year.

The refinery would be one of the largest joint venture investments in China, similar in size to the $5 billion refinery to be built by Exxon Mobil and Saudi Aramco in Fujian.

State-owned Kuwait Petroleum Corp (KPC) and China's largest refinery Sinopec received preliminary Chinese government approval for the Guangdong plant last year.

In August, Sinopec said Shell and US Dow Chemical Co were also in talks to participate. There were several reasons KPC no longer wanted Shell involved, including objections from China's National Development and Reform Commission, Kuna reported, citing Chinese sources. KPC was in talks on the project with BP, which had previously expressed interest, it said.

It was unclear why BP would be a better fit than Shell for the project. Analysts say Beijing is showing a preference toward teaming up with state-owned firms that can offer oil supply guarantees such as KPC, with less need for the technology or financing offered by oil majors such as Shell or BP.

"The issue has been dragging on for months," said Kuwaiti energy analyst Kamel Al Harmi.