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China grants clearance to Sinopec-Kuwait refinery

CNOOC $7.6 bln expansion also gets environmental clearance.

September 8, 2010 2:24 by

China has granted environmental clearance and okayed a technical review of an $8.7 billion refinery and petrochemical joint venture between Sinopec and Kuwait, paving the way for final state approval soon.

The venture, to be built in southern coastal city Zhanjiang, includes a 300,000 barrels-per-day (bpd) refinery and a 1 million tonnes-per-year ethylene complex, at a cost in line with previous estimates of around $9 billion.

“With both the MEP clearance and the technical review, it means the project is technically ready for final approval by the NDRC,” said one industry executive with direct knowledge of the Kuwait venture on Wednesday. “They are both significant.”

The venture will be 50-50 owned with Sinopec Group, parent of top Asian refiner Sinopec Corp , but Kuwait is likely to hunt for a second or third foreign partner for joint funding once the final Chinese approval is granted, the executive sai

OPEC member Kuwait is on the lookout for direct marketing and retail access in China, the world’s fastest expanding major fuel market which has long been dominated by oil duopoly Sinopec and PetroChina .

“Whether Kuwait can get the retail access will be the deal-breaker in the end. It’s the same problem other foreign firms face in China,” said the executive.

So far only a handful of foreign companies such as Exxon Mobil and Saudi Aramco, via their $5 billion venture with Sinopec Corp in Fujian province, have direct marketing access to the roughly 9 million bpd fuel market, the world’s second-largest after the United States.

For China, which now imports over half of its crude requirements, a commitment to receive long-term oil supplies from an exporter such as Kuwait is essential.

Kuwait, the world’s seventh-largest crude exporter, aims eventually to export 500,000 bpd of crude to China, or double its target for this year.

Last year, state-run Kuwait Petroleum Corp briefly talked to potential investors Shell and Dow Chemical Co , but the firms did not make any commitment for a consortium

The environmental clearance came after the venture was forced to relocate last year from Nansha on the Pearl River Delta due to strong opposition from environmentalists and residents.

The joint venture also committed to spend about $626 million, or 7.22 percent of the total investment, on environmental protection, according to a statement on the website of the Ministry of Environmental Protection (MEP) (


Another MEP statement said the government had given environmental clearance to a separate $7.6 billion plan by CNOOC to expand its refinery and petrochemical plant in southern Huizhou city.

The investment in the Huizhou plant, by CNOOC Ltd’s parent CNOOC group, will add a 200,000 bpd refinery and a 1 million tpy ethylene plant on top of its existing 240,000 bpd refinery and 800,000 tpy ethylene plant.

(Editing by Jane Baird)

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