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Reuters: Shell, Kuwait sign pact to seek China, India deals: “KPI said it hoped the deal could pave the way for new refineries to handle heavy Kuwaiti crude, something which would ease a key bottleneck in the global oil market.” ( 22 March 05


By Anna Mudeva and Haitham Haddadin

Tue Mar 22, 2005   


AMSTERDAM/KUWAIT (Reuters) - Royal Dutch/Shell Group and state-owned Kuwait Petroleum International (KPI) have signed a deal to jointly develop downstream investments in China and India, the firms said on Tuesday.


KPI said it hoped the deal could pave the way for new refineries to handle heavy Kuwaiti crude, something which would ease a key bottleneck in the global oil market.


The agreement follows a deal last week between KPI, the overseas arm of Kuwait Petroleum Corp., and BP Plc. to seek joint investment opportunities in China.


Analysts said that, for the Western oil firms, such deals were more focused on gaining access to Kuwaiti oil reserves than about expanding in fast-growing Asian markets, something they could do without KPI's partnership.


"BP and Shell want to have access to Kuwait and Kuwait wants to have access to China .. I don't think you can decouple the two," said one analyst.


Shell and KPI will explore opportunities across the downstream chain, from supply and refining to distribution and marketing of petroleum products, Shell said in a statement.


"This strategic partnership will seek opportunities around the world for leveraging Shell's global downstream experience with Kuwait's hydrocarbon resources and growing downstream investments," Shell downstream boss Rob Routs said.


The deal could help Kuwait find a home for the significant increase in output it plans in coming years, using Shell's contacts and technology to build its share in the Asian market.


The non-exclusive deal applies globally, but Shell and KPI said they were looking at India and China in particular.


Abdullatif al-Houti, who heads KPI, told Reuters in an interview that no specific investments had been identified.


A Shell spokeswoman added that no financial or volume targets had been set and that the agreement did not cover petrochemicals investments.


Oil prices hit new highs this month on the back of record demand, especially from China. Spare capacity does exist but most of this is heavy crude and there is a lack of refining capacity to handle such oil.


This shortage has pushed up refining margins, especially in Asia, and KPI is seen as keen to establish refining capacity in China.


Kuwait, like most Gulf states, imposes strict limits on the involvement of foreign energy companies in its oil and gas sectors.


Western oil firms, which are struggling to replace the oil they pump with new reserves, are keen to gain access to such states.


Shell is part of an international consortium led by U.S. oil major ExxonMobil that is competing with two other international consortia for the $9-billion Project Kuwait plan to upgrade oil fields in northern Kuwait. BP and ChevronTexaco lead the other consortia.


However, the plan has been under discussion since the early 1990s and many MPs oppose the idea of bringing foreigners into the lucrative upstream oil sector.


Shell has also assisted the Kuwaiti national oil company in developing its staff and transferring technology.


Analysts say such activities are aimed at ensuring that if Kuwait does open the door to Western oil firms, either via Project Kuwait or other projects, Shell will be a favoured partner.


KPI has a refinery in Rotterdam and a 50 percent stake in another in Sicily, Italy. It also supplies oil products across Europe.


Kuwait produces about 2.5 million barrels of oil per day, the Shell statement said, and plans to hike this to 4 million barrels per day in 2020.


(Additional reporting by Tom Bergin in London and Christopher Borowski)


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