3 Firms Announce Petrochemical Venture
Friday March 30, 5:58 am ET
ExxonMobil, Saudi Aramco and Sinopec Join Forces to Expand Refinery, Operate Gas Station Chain
BEIJING (AP) -- ExxonMobil, Saudi Aramco and China's No. 2 oil company announced two joint ventures worth a total of $5 billion on Friday to expand a Chinese petrochemical refinery and operate a chain of 750 filling stations.
The announcement comes as foreign oil companies step up investment in China's petrochemical industry to supply plastics and other chemicals to export-driven manufacturers.
The ventures will expand the foothold for ExxonMobil Corp. and Saudi Aramco, the Saudi government oil company, in China's state-dominated oil industry. The third partner is government-owned China Petroleum & Chemical Co., better known as Sinopec.
The petrochemical project will triple capacity at a refinery in the southeastern city of Quanzhou to 240,000 barrels per day, the companies announced. They said it would be completed by 2009.
"This facility will be world-class in its scale and capabilities," Steve Simon, an ExxonMobile senior vice president, said in a speech at a ceremony to mark the ventures' launch.
The ceremony at the Great Hall of the People in central Beijing was attended by the Saudi oil minister, Ali Al-Naimi, and Chinese, Saudi and U.S. oil executives.
Beijing has been expanding ties with the Middle East as it tries to secure foreign energy supplies.
"Saudi Aramco's participation in these projects is another step forward in our kingdom's growing relationship with China," said Saudi Aramco's president and CEO, Abdallah S. Jum'ah.
The refinery is the Saudi oil company's first major investment in China.
It follows lengthy, off-and-on negotiations between Sinopec and its partners -- 12 years for ExxonMobil and 10 for Saudi Aramco. The reported scale and cost have changed several times.
Saudi Arabia has moved more cautiously than some other Middle Eastern nations in pursuing Asian investments, said Robert Broadfoot, a consultant in Hong Kong who advises oil companies and other investors.
"Due to their oil revenues, they are not under a great deal of urgency to cut deals with China," said Broadfoot, managing director of Political & Economic Risk Consultancy, Ltd.
"They are looking at refining (and) upstream businesses in China, so long as they can get the terms they want, and they aren't getting those terms," he said.
The companies gave no details on how much money or other assets each was contributing to the refinery expansion, leaving the size of foreign investment unclear.
The facility will process sour, or high-sulfur, Arabian crude supplied by Aramco, the companies said. It will have its own oil tanker berth and produce ethylene, polyethylene, polypropylene and paraxylene.
Foreign oil companies are expanding investment in petrochemicals to meet demand from thriving export-driven manufacturing industries.
Royal Dutch Shell PLC is a partner in a $4.3 billion petrochemical plant in Huizhou, a coastal city in Guangdong province northeast of Hong Kong. Britain's BP PLC and Germany's BASF AG have projects under way.
A Sinopec subsidiary is to own 50 percent of the petrochemical venture, with the rest split equally between Chinese subsidiaries of ExxonMobil and Saudi Aramco.
The second venture announced Friday will operate a chain of service stations in China's prosperous southeastern province of Fujian. Sinopec will own 55 percent of this business with the rest split equally between its two partners.
Executives of the companies declined to talk to reporters after the ceremony and spokespeople for the companies said they could not release additional financial details.
The project is the second major foreign-linked investment in China unveiled this week after Intel Corp. on Monday announced plans for a $2.5 billion chip factory.
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