Agreement with mainland on refinery is just the beginning

PUBLISHED : Friday, 25 February, 2011, 12:00am
UPDATED : Friday, 25 February, 2011, 12:00am

Trade ties between Kuwait and China continue to strengthen, thanks to oil exports from the Arab state.

Kuwait's crude oil exports to the mainland surged 32 per cent last December from a year earlier to about 127,000 barrels per day.

And there are greater oil-related developments afoot on the mainland, where Kuwait is increasingly making its presence felt.

Last September, the Chinese Ministry of Environmental Protection approved a US$9 billion oil refinery project which will be jointly owned by state-run firms Kuwait Petroleum Corporation (KPC), the Petrochemical Industries Company (PIC) and Sinopec.

The refinery will be on Donghai Island near Zhanjiang City in Guangdong province.

The total investment is 59 billion yuan (HK$69.75 billion), which includes 4.26 billion yuan earmarked for environmental protection.

The project includes a refinery capable of handling 300,000 barrels per day.

It also has ethylene and related utilities with a capacity of one million tonnes a year, a crude jetty, and oil product pipelines to the Sanlingsan initial station.

The National Development and Reform Commission (NDRC) gave preliminary approval to the project owners in May last year. Last September, the Ministry of Environmental Protection of China (MEP) issued the approval letter. The NDRC endorsed the project this month.

The Guangdong provincial government is also securing the green light from the Ministry of Land and Resources for the construction of the complex.

Kuwait will become the second Arab oil producer to get an oil foothold in China after Saudi Arabia, which put a refining and petrochemical joint venture into operation last year in Fujian province after lengthy negotiations with mainland authorities.

Kuwait Petroleum International (KPI), KPC's international refining and market unit, has been representing Kuwait in talks.

The refinery project was included in China's 11th Five Year Plan, from 2006 to 2010.

KPC CEO Saad Al-Shuwaib stated that the joint venture aims to get NDRC's final approval as soon as possible.

Under Beijing's initial approval in 2006, the integrated complex was planned for the Nansha district of provincial capital Guangzhou but, amid growing concern over the possible environmental impact on the densely populated area, it was agreed in May 2009 to relocate the project to much less crowded Zhanjiang City.

The project includes a retail network in and around Guangdong province. Kuwait will supply all the crude to the refinery.

KPC and Sinopec will each hold a 50 per cent stake in the joint venture, with KPC planning to give 20 per cent of its share to potential international partners.

KPI's international operations stretch around the world. Known by its trademark Q8, it refines and markets fuel, lubricants and other petroleum derivatives outside Kuwait, focusing its activities mainly in Europe and Asia.

Established in 1983, KPI operates under the KPC banner, which brings together all the state-owned elements of the Kuwait oil sector and is recognised as one of the world's top 10 energy conglomerates.

KPI's business encompasses the marketing and sales, research and refining of petroleum products.

Q8 has expanded rapidly through acquisitions selected for their strategic fit with the business.

Today, Q8's business is expanding in Asia, with plans for ambitious joint-venture marketing and manufacturing projects on the mainland and Vietnam.