Kuwait Petroleum and Sinopec Plan to Build China's Largest Joint Venture Refinery

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Researched by Industrial Info Resources (Sugar Land, Texas)--By mid-May, Kuwait and China had signed five agreements to jointly build a large-scale refinery in China's Guangdong province. The agreements involved energy and financing, with the Kuwaiti government agreeing to fund $24 million to curb the heavy pollution in Bositeng Lake in the Xinjiang Autonomous Region. The joint venture refinery project will be carried out by Kuwait Petroleum Corporation (KPC) and China Petroleum and Chemical Corporation (NYSE:SNP) (Sinopec) (Beijing).

The estimated total investment value of this project is between $8 billion and $9 billion. This will become the largest joint venture enterprise in China in the oil and gas sector. Currently, the joint venture with the largest capital investment in China is the $4.3 billion Sino-Dutch joint petrochemical company by China National Offshore Oil Corporation (CNOOC) (Beijing) and Royal Dutch Shell plc (NYSE:RDS.A) (The Hague, Netherlands).

In the upcoming Sino-Kuwaiti joint venture, KPC will reportedly hold a 30% of the project, while Sinopec will hold 50%. Royal Dutch Shell and The Dow Chemical Company (NYSE:DOW) (Midland, Michigan) will each hold 10% of the joint venture.

According to the agreed plan, Kuwait and China will invest a total of between $8 billion and $9 billion into this project. The designed refining capacity of the refinery is 15 million tons per year, and the designed ethylene production capacity is 1 million tons annually. This will be China's largest petrochemical base. Kuwaiti Oil Minister Al-Ahmad Al-Sabah told the media that construction of the refinery will be completed in 2013 and will have the capacity to process 300,000 barrels per day (BBL/d) of crude from Kuwait. By that time, Kuwait will increase its daily crude export to China by 500,000 barrels.

According to Guangdong Provincial Industrial Plan for Petrochemical Industry, during the Eleventh Five Year Plan Period (2006-10), Guangdong will build five petrochemical bases, build or expand five refining units and five ethylene projects, and will build or expand a large number of downstream petrochemical projects. Among the five refining projects, Guangzhou Petrochemical, Maoming Petrochemical, Zhanjiang Dongxing Petrochemical are all part of Sinopec's expansion endeavor. The Huizhou 250,000-BBL/d refining project that recently went into production is the upstream auxiliary project CNOOC built for its 800,000-ton-per-year ethylene unit.

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