Shell and CNOOC sign joint venture petrochemicals contract

Published October 30th, 2000 - 02:00 GMT

A joint venture contract for a US$4 billion petrochemicals complex in southern China was signed today by Wei Liucheng, President of China National Offshore Oil Corporation (CNOOC), and Evert Henkes, chief executive of Shell Chemicals, in the presence of senior Chinese officials and Royal Dutch/Shell Group Managing Director Harry Roels.  


The signing paves the way for the formation of a joint venture company which plans to build a world-scale petrochemical complex at the Daya Bay Economic and Technical Development Zone, Guangdong Province.  


The joint venture partners are Shell Nanhai BV with 50 percent shareholding and CNOOC Petrochemicals Investment Limited (CPIL), also with 50 percent. CPIL is owned by CNOOC (90 percent ) and the Guangdong Investment & Development Company (10 percent). The new joint venture will be called the CNOOC and Shell Petrochemicals Company Ltd.  


The major features of the world-scale project are an 800,000 tone per annum (tpa) ethylene cracker; a 560,000 tpa styrene monomer and 250,000 tpa propylene oxide plant; a 320,000 tpa ethylene glycol plant; a 240,000 tpa polypropylene plant; a high density polyethylene plant of 200,000 tpa with capability to produce linear low density polyethylene; and a low density polyethylene plant of 250,000 tpa with integrated support facilities and utilities. The entire complex has been designed using advanced technologies to minimize environmental impact.  


The agreement today is a major milestone for the project. The next step is to obtain government approval of the contract and associated contracts and licenses, following which the joint venture can be formed.  


President Wei said: “The CNOOC and Shell Petrochemicals project is the start of CNOOC’s intention to expand its downstream business and integrate this business with our upstream portfolio.  


The establishment of the joint venture is a good demonstration of our strategy to develop downstream, and move into the petrochemicals industry with a fresh approach. That means concentrating on economic benefits, advanced technology, world scale operations and internationally advanced management.”  


Evert Henkes said: “I am delighted that the project has reached another important milestone. Nanhai has an excellent fit with Shell Chemicals' global strategy to focus on the production of major petrochemical building blocks and polyolefins to large industrial customers. In all of our core businesses we are in a strong leading position in the market and Nanhai will strengthen that position further.  


We believe that the joint venture will benefit from Shell's strength in construction, marketing and technology; as well as from CNOOC's leadership in foreign cooperation and good knowledge of the Chinese business environment."  


A framework agreement for the project was signed by the partners in February 1998, followed by the signing of a Memorandum of Understanding on Infrastructure, Amenities, Land and Utilities in December 1998 between the Nanhai Partners and the Huizhou Municipal Government.  


The first activity of the new joint venture will be to start a Definition Phase. This is expected to take 18-20 months and involves preparing basic design engineering packages; completing an updated Environmental Impact Assessment, preparing bid packages for the engineering, procurement and construction phase of the project and arranging financing.  


Major construction work is expected to start in early 2003 and the complex is scheduled to start operations at the end of 2005.  


Once completed, the joint venture company will produce about 2.3 million tonnes per year of products, generating up to US$1.7 billion in products sales, primarily supplying customers in Guangdong and the high consumption areas of China's coastal economic zones. The project is expected to strengthen industrial development in these areas, attract secondary manufacturing and service industries and create job opportunities directly and indirectly. 



© 2000 Mena Report (

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