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Planet Ark: Gas remains centrepiece in Shell China strategy: BEIJING –“Royal Dutch/Shell Group aims to become a major supplier of liquefied natural gas to China and gain a foothold in the country's booming oil refinery sector, a senior company official says.” ( 5 Nov 04


CHINA: November 5, 2004


BEIJING - Royal Dutch/Shell Group aims to become a major supplier of liquefied natural gas to China and gain a foothold in the country's booming oil refinery sector, a senior company official says.  


The Anglo-Dutch group which recently pulled out of two giant gas projects in China, is still on course to invest $3-4 billion (1.6-2.2 billion pounds) in a variety of projects over the next four years, including exploration and production, marketing of oil products, petrochemicals and coal gasification.


Heng Hock Cheng, Chairman of Shell companies in China, told Reuters in an interview this week, that 2004 marked the year of Shell's largest investment in a single year in China at $1 billion.


Gas projects remained central to the company's strategy.


Shell is negotiating with the second-largest state oil and gas firm Sinopec Group to export liquefied natural gas to east China from its gigantic $10-billion Sakhalin-2 project, off the far eastern coast of Russia.


The energy giant, the world's largest private LNG supplier, is also seeking to get involved in the construction of gas receiving terminals on China's east coast.


"We are very keen to see how we can be part of that process as an LNG supplier," Heng said.


China's gas use, currently less than 3 percent of the total energy mix, is expected to leap to 10 percent in 2020 as the economy continues to experience rapid growth.


Shell forecasts China's gas demand will rise to 210 billion cubic metres (bcm) by 2020, a quarter of which has to be supplied in the form of LNG, super-cooled natural gas for transport by tankers. Current annual gas demand is about 40 bcm.


China is poised to build at least four LNG terminals by 2010, when imports could amount 20 million tonnes, having committed to buy gas from Indonesia and Australia and also looking to import gas from Iran.


Shell, which will have spent $3 billion in China by the end of this year, would be a much bigger energy investor if it had not pulled out of the West-to-East gas pipeline in August and the East China Sea gas project last month.


"While interesting opportunities in themselves, they were part of a very large market which is actively developing on many fronts," Heng said.


Analysts said the exit could force Shell to re-evaluate its gas strategy in China as it had seen piped gas and LNG supply and gas marketing in China as part of an integrated approach.


Shell's other interests in China include the Changbei gas field in the country's northwest, its only production sharing contract in onshore China, with estimated reserves of 50 bcm and potential production of 3 bcm a year.


Heng said the company would decide next year whether to go ahead with developing the field.




Shell is also evaluating opportunities to invest in China's badly needed refinery capacity expansion and aspires to play a greater role in oil retailing.


Heng said Shell was in talks with China National Offshore Oil (CNOOC) for a stake in a planned $2 billion, 240,000 barrels per day refinery in the southern Guangdong province, where Shell and the Chinese company are already building a world-class petrochemical complex.


China is speeding up expanding and building new refineries to meet explosive oil demand growth that has forced most plants to pump at full tilt.


Heng said the $4.3 billion petrochemical venture, the largest energy joint venture in China, would start production by the end of 2005.


Shell is among a handful of early birds in China's retail business and expects to expand operations as the country opens its tightly state-controlled market to foreign firms, he said.


The company aims to boost the number of gas stations to 180 by the end of this year and eventually 500 in east China's Jiangsu province, under a $187 million joint venture with refiner Sinopec 0386.HK SNP.N . It has around 30 stations now.



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