HONG KONG, (Reuters) – Private Chinese firm Shide and Saudi Basic Industries Corp. (SABIC) may have to wait another year for approval on a long-delayed $5.2 billion petrochemical complex, sources familiar with the situation said on Thursday.
SABIC, the world’s largest petrochemical company by market value, said last month it may re-locate the complex, envisioned for northeast China’s Dalian, if Beijing kept putting off approval for a project proposed as far back as 2003.
SABIC and Shide — which makes everything from appliances to chemical building materials — have been in talks for three years on the complex, now seen including a 10 million tones per year (tpy) oil refinery, a 1 million tpy ethylene plant and a 300,000 tonne oil terminal.
If it goes ahead, it will be China’s first petrochemical project built by a private company, breaking a monolopy by domestic oil-producing leaders PetroChina and Sinopec Corp.
It would also give SABIC a coveted foothold in the world’s second-largest oil consumer. The Saudi giant hopes China will help it achieve a goal of almost doubling output to 100 million tonnes by 2015.
Several industry sources told Reuters the government was holding off on the project because it had approved an 800,000 tpy naphtha cracker last year for PetroChina’s Fushun subsidiary and was in no rush to allow another one so soon.
Fushun and Dalian are in northeastern Liaoning province.
“All we are waiting for is the approval of the National Development and Reform Commission and the State Council,” a source close to the situation told Reuters,
The Commission is China’s top economic planning agency, and the State Council is the country’s cabinet.
“The government postponed the project probably because they didn’t want to add too much ethylene capacity in one province in such a short time,” he said.
“But I can’t see any reason why the government will not approve this project.”
China’s booming economy has made it Asia’s largest importer of petrochemicals, sourcing 60 percent of its requirements from overseas. The country is already building petrochemical plants with BP Plc, BASF AG and Royal Dutch Shell, each costing $2.7 billion to $4.3 billion.
Resource-rich Shaanxi province is also seeking to strike a landmark alliance with PetroChina to build a $2.6 billion petrochemical plant with a 1 million tpy capacity.
SABIC said last April the project was on track, after Chinese President Hu Jintao stopped at the firm’s headquarters during a visit to Saudi Arabia, which in 2006 shipped 23.87 million tonnes of crude to China as its largest oil supplier.
Then in February, SABIC’s chairman surprised the industry when he said the company might go elsewhere.
“I don’t think SABIC will give it up that easily,” the source said.
Both companies and local governments are lobbying hard for approval. A government official told Reuters the NDRC was studying the plan.
It typically takes four years to prepare and build a complex once it gets the go-ahead, the sources said.
“If the government can approve it next year, when it starts up in 2012, the plant is expected to meet a rising cycle for petrochemicals.”
Shide would hold 50 percent of the project — unusual for a private firm in the Communist country’s oil sector given the size of the investment — while SABIC would hold the other half.
Industry officials have told Reuters that China had agreed to increase purchases of Saudi crude oil in 2007 by about 44,000 barrels per day, or 9 percent, from last year.
Saudi Aramco, SABIC’s affiliate, recently agreed with Sinopec and Exxon Mobil Corp. to expand an existing refinery in the southeastern province of Fujian.