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Christine Chan

Attempts by Royal Dutch/Shell to foster closer ties with mainland oil giant CNOOC are gathering strength.

Reuters yesterday quoted an unnamed mainland industry official as saying that Shell planned to invest US$200 million to US$400 million in CNOOC's initial public offering, scheduled for the first quarter of next year.

The offering is expected to raise US$1.5 billion to US$2 billion. CNOOC will have a dual listing - in Hong Kong and New York.

Talk that Shell might take up CNOOC's shares has come despite the latter having placed out US$460 million worth of shares in two rounds of pre-listing share placements this year.

It also comes amid an increasing number of strategic alliances forged recently between foreign firms and mainland oil firms as overseas interests step up their drive for a bigger slice of the world's fourth-largest petroleum market.

Last year, the mainland consumed 4.5 million barrels of oil a day.

Leading the charge is BP Amoco, which bought a 2 per cent stake in PetroChina - the mainland's largest oil producer - and recently pledged to invest in the imminent listing of China Petrochemical Corp (Sinopec), the country's second-largest oil producer.

Earlier this month, BP revealed plans for the industry's first big move into the mainland's retail market with an 800-petrol station network in Guangdong which could cost more than US$500 million.

Officials from BP, one of the world's top three oil companies, were in talks with PetroChina on retail co-operation over the next few years.

'BP's plans to build a [petrol] retail network in the mainland is a wake-up call to other companies,' an oil analyst said.

Officials of both Shell and CNOOC were unavailable for comment yesterday.

But sources said CNOOC has maintained close ties with a number of foreign oil giants, including Shell, BP Amoco and Exxon Mobil, and that talks on the prospect of co-operation have been under way on a regular basis.

CNOOC and Shell, for instance, have signed agreements for exploration and production projects in the South China Sea, with Shell undertaking all exploration and appraisal costs.

If the exploration is successful, CNOOC will hold a 51 per cent stake in the project.

The companies have also signed a framework agreement for a US$4.5 billion petrochemical complex at Huizhou city in Guangdong. Shell will have a 50 per cent stake in the venture, while CNOOC will have 40 per cent.

The oil analyst said: 'Every oil company wants to have the ability to sell [petrol] in the retail market in the mainland. Shell is one of them. Shell has fingers in apparently different mainland oil pies.'

However, its focus so far has been on oil exploration and development, the analyst said.

'While both oil exploration and retailing are lucrative markets, Shell lacks a foothold in the retail market, but it doesn't in exploration and production,' he said.

Shell is reported to be operating 40 mainland outlets through seven joint-venture marketing offices set up over the past three years.

Analysts believe the strategic stake in CNOOC would help oil the wheels of its entry into the highly protected market in the mainland in a big way.



China energy giant CNOOC raises output targets and planned exploration spending as oil price recovers

ExxonMobil to build petrochemical complex in China’s Daya Bay development zone

CNOOC reports worst result since at least 2011

Husky and Primeline legal threats against CNOOC put spotlight on mainland China gas pricing dilemma   

China National Offshore Oil Corporation (Cnooc)

Shell-CNOOC in cosier issue ties