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Kuwait Petroleum Selects Total as Partner in $9 Billion China Refinery

Thursday, 26 January 2012 | 00:00
Kuwait chose Total (FP) SA as the third partner to build a $9 billion oil refinery in China, Kuwait Petroleum Corp. Chief Executive Officer Farouk Al-Zanki said.
“We are negotiating now with Total, and hopefully we will reach an agreement based on a memorandum of understanding,” Al- Zanki said in a telephone interview today from Kuwait City. “We’d like to sign it in February.”
Total would take part of Kuwait’s 50 percent stake in the refining and chemical venture, with the Paris-based company’s share “still to be decided,” Al-Zanki said. China Petroleum & Chemical Corp. holds the remaining 50 percent. The complex, scheduled to start operating in 2015, will include a refinery with an oil-processing capacity of 15 million metric tons a year, or about 300,000 barrels a day, as well as a 1 million ton-a-year ethylene plant, China Petroleum said in November.
Kuwait Petroleum is pushing ahead with the joint venture in southern China’s Guangdong province and a 200,000 barrel-a-day refinery in neighboring Vietnam as part of a strategy to expand abroad, according to Al-Zanki. Kuwait is the fourth-biggest producer in the Organization of Petroleum Exporting Countries, and Asia is its biggest market, accounting for 84 percent of the Gulf state’s crude exports in 2010, according to OPEC data.
The state-run Kuwaiti company and Japanese refiner Idemitsu Kosan Co. (5019) each has a 35.1 percent stake in the Nghi Son refinery in Vietnam. State-controlled Vietnam Oil & Gas Group holds 25.1 percent of the venture, and Mitsui Chemicals Inc. (4183) has the rest.
Exchange Rates
The partners have yet to agree on currency exchange rates to be used for the Vietnamese project, Al-Zanki said. “There’s a team looking closely at ways and means to secure the foreign exchange, while other financial issues are being resolved.”
Al-Zanki expects the partners in Nghi Son to resolve their remaining issues by the end of February, while Kuwait Petroleum and China Petroleum are “committed” to their joint venture and have formed a team to determine how best to proceed.
The Kuwaiti company also plans to build an oil refinery at home, at a cost of at least 4 billion dinars ($14.4 billion), to help meet domestic demand. The 615,000 barrel-a-day Al-Zour plant is still awaiting final approval from the Supreme Petroleum Council, the country’s highest decision-making body for oil policy.
Kuwait National Petroleum Co., the state-run refiner, is seeking foreign companies to work as consultants on the Al-Zour project, which stalled three years ago amid political opposition.
Source: Bloomberg
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