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Kuwait, Sinopec closer to secure deal in China's refinery JV

By Miyoko Ishigami (with photos) BEIJING, JAN 5 (KUNA) -- The latest talks between state-owned Kuwait Petroleum Corporation ( KPC ) and Sinopec moved the two corporations closer to secure an acceptable deal in the execution of USD 9 billion joint refinery and petrochemical project, KPC Chief Executive Officer Farouk Al-Zanki said Thursday.

"My meeting with Sinopec Chairman Mr. Fu Chengyu was very successful, as the both sides showed willingness to continue constructive dialogue and decided to form a special KPC team that will look into new ways to create a win-win situation for the project in south China. This is a great accomplishment," Al-Zanki, who is currently in Beijing, told Kuwait News Agency (KUNA).

The project with Asia's top refiner Sinopec, potentially to be the largest Sino-foreign joint venture in China, involves a 300,000 barrel-per-day refinery and a one million-ton-a-year ethylene plant in Guangdong Province. Kuwait will be the sole supplier of crude oil to the world-class integrated complex, to be located on Donghai Island in the southern coastal city of Zhanjiang.

With an eye to starting operations of the refinery part at the end of 2014, construction has already begun. Kuwait became the second Arab oil producer to build a refinery in China after Saudi Arabia, which finally put a refining and petrochemical joint venture into operations in 2009 in neighboring Fujian Province after more than 10 years of negotiations with the Chinese authorities.

As an indication of their desires to expand energy cooperation in addition to the planned refinery project, Al-Zanki and Fu also agreed to forge a strategic alliance deal between KPC and Sinopec to expand the scope of cooperation in the oil and gas sector in Kuwait, in China and jointly in a third country.

The strategic alliance agreement is planned to be signed during Fu's visit to Kuwait next month, as Al-Zanki extended an invitation to Fu to participate in the upcoming Kuwait International Oil Executives Golf Tournament.

According to KPC 's top official, the two companies have agreed to draw up strategic plans in the both immediate and long-term. "The immediate strategic plan will focus on enhancing crude oil trade volumes between the two companies and develop further the state-to-state relations, while the long-term strategic plan will call for new business opportunities between KPC and Sinopec," he said.

As one of the pillars of KPC 's expansion strategy for 2030, the joint venture represents a highly significant step forward in plans to expand its business in China. With a population of some 100 million, Guangdong is China's largest oil consuming province that creates a huge energy market.

It is Al-Zanki's first visit to China as CEO since assuming the post in 2010. During his stay, he also held a series of talks, which were all arranged by the KPC Beijing office, with heads of major Chinese oil companies, such as ChinaOil, CNOOC and Zhenhua Oil.

Al-Zanki was accompanied by KPC International Marketing Managing Director Nasser Al-Mudhaf, Beijing Chief Representative Mohammad Al-Qallaf and other senior officials. Their meetings sent a strong signal that KPC values the world's biggest energy market and is keen on further enhancing its ties with the Chinese side.

The talks with Sinopec was also attended by Kuwait Petroleum International (KPI) President Hussain Esmaiel, KPI Deputy Managing Director Mohammed Rashed Jasem and KPI China General Manager Meshari Al-Mahmoud.