Home › Forums › Refining Community › Refinery News › Kuwait, China to speed up multibillion refinery, petrochem project › RE: Kuwait, China to speed up multibillion refinery, petrochem project
Update Sino-Kuwaiti Guangdong Refinery/Coker Addition – recent announcement that KPC & Sinopec will be eliminating Shell from the $5 billion new Nansha grassroots refinery (+coker) & petrochemical plant project for Guangdong province. The NDRC in China gave instructions that Shell be eliminated to speed up progress & avoid any further delays /cost increase on the project & KPC also changed its stance on Shell. UK’s BP Oil is listed as possibility but may have similar issues about the project. The timing on Feasibility study &
Key issues for the project are: the unsuitability of the plant location, it’s impact on local environment & nearness to Hong Kong (which were also raised by KPC). Another major issue is Chinese governments control of oil & fuel prices and inability to pass cost increase to consumers – which are going to make crude contracts with 100% supply from Kuwait difficult. (But a similar $4 billion project in Fujian with Saudi’s seem to have overcome these hurdles.)
Shell may eventually consider itself lucky for dropping out. These issues would make any International Investor or Western world expansion-holic sober up and remember that China is not a free market (despite its WTO status?), there are few ownership laws / protections for private investments (even Chinese private investors) and that China’s explosive demand growth for gasoline & fuels will soon remove it as products exporter and profits will have to come from Government controlled consumer markets
This year China has recently stopped all exports of fuels (gasoline & diesel) to meet shortfall in domestic demand without allowing a cost increase in crude to be passed on to the consumers as mentioned earlier……a shadow of things to come for these new refineries.
All the farm machinery in China’s Agricultural industry runs on diesel and this sensitive market is also protected from fuels impact by the Chinese government. China has to practice what it calls market economy with socialist principles (i.e. it ignores rules game when it comes to selling prices) because it has to reduce the growing inflation pressures. The government at all cost needs to avoid social unrest as a result of high inflation, and therefore its priority is social stability not profits.
So all the roads may have led to Rome, but it seems all the Refinery Pipes eventually lead to Beijing, and needs to be high on Risk list.