Thursday, May 07, 2009

By Simon Hall and Wan Xu

Of DOW JONES NEWSWIRES

BEIJING (Dow Jones)--Kuwait plans to open a network of filling stations in China, under a US$7 billion joint venture refinery and petrochemicals project to be discussed during a visit to Beijing by the Emir of Kuwait next week.

"We are going to build the biggest joint venture in the oil and gas field - a refinery and a petrochemicals complex in the south of China which will use Kuwaiti crude oil as feed stock and which will cost around $7 billion," Kuwait's ambassador to China, Faisal Rashid Al-Ghais, said Thursday.

"It will also comprise a chain of fuel distribution stations," the envoy told Dow Jones Newswires.

Only a tiny percentage of China's tens of thousands of filling stations now carry foreign brand names.

BP (BP), Exxon Mobil Corp. (XOM), Shell and Total S.A. (TOT) have all gained footholds in the fuel retail sector through joint ventures with China Petroleum & Chemical Corp. (SNP), or Sinopec, and with PetroChina (PTR), the listed unit of state oil giant China National Petroleum Corp.

Kuwait has a long-established filling station brand, Q8, owned by Kuwait Petroleum International.

It has a network of more than 4,000 Q8 branded service stations across seven European countries - Italy, Germany, Sweden, Denmark, Holland, Belgium and Luxemburg, according to the company's web site.

Environment Issue

Kuwait's emir, Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah, and a team of ministers and officials will sign several agreements and Memoranda of Understanding during the May 10-13 visit, the envoy said.

Kuwait officials could not confirm, though, whether final agreement on the refinery and filling station project will be reached during the visit.

"Cooperation between China and Kuwait has progressed quantitatively and qualitatively. Relations in the economic field have expanded most, whether in the form of trade, energy or investments, and I foresee further rapid expansion in this field particularly in the future," ambassador Al-Ghais said.

"The energy sector represents the cornerstone of cooperation between the two countries," he added.

Kuwait is China's eighth-largest crude oil supplier and the Gulf country also exports liquefied petroleum gas and naphtha to China, he noted.

On April 28, Kuwait's oil minister met Chinese government and state oil company officials to try to advance long-running talks for the 300,000-barrel-a-day refinery in Guangdong province being built by Kuwait Petroleum Corp. and Sinopec.

Despite an initial agreement back in 2005, the refinery project hasn't yet received an official go-ahead from Beijing.

One obstacle has been the completion and approval of an environmental impact assessment, or EIA, as the planned location of the complex in Nansha in the delta of the Huangpu river, close to major population centers, has prompted objections from environmentalists.

Kuwait supplied China an average 128,000 barrels a day of crude in January-March 2009, slightly up from 2008, when imports averaged 118,000 barrels a day.

Sino-Kuwaiti trade volumes jumped to $6.7 billion in 2008 from $3.67 billion in 2007, an increase of 85%, not counting transit trade which goes through Dubai.

One of China's other state oil companies, Sinochem Group, is still in talks with Saudi Arabia and Kuwait over long-term supply of crude oil for a refinery in Quanzhou city.

Kuwait and China have other oil-related ventures underway - Sinopec Group, the parent of Sinopec Corp., announced early in April that its International Petroleum Services unit had signed a $350 million contract with Kuwait Oil Co. to build five rigs over the next five years.

By Simon Hall and Wan Xu, Dow Jones Newswires; +86-106566 5848; simon.hall@dowjones.com

(END) Dow Jones Newswires

07-05-09 1127GMT