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SHELL SEEKS CHINA FOR PARTNERSHIP TO INVEST IN IRAQI OIL-FIELD


Royal Dutch Shell Plc and two of China's biggest state-owned oil companies have been in talks of a possible joint bid to develop the Kirkuk oil field in northern Iraq. Shell Europe's largest oil producer, is in talks with, China National Petroleum corp. and china Petrochemical Corp., but have yet to decide on their stakes in the venture.


Royal Dutch Shell Plc and two of China’s biggest state-owned oil companies have been in talks of a possible joint bid to develop the Kirkuk oil field in northern Iraq. Shell Europe’s largest oil producer, is in talks with, China National Petroleum corp. and China Petrochemical Corp., but have yet to decide on their stakes in the venture.

Chief Executive Officer Jeroen van der Veer, told reporters, “we are in the process of forming partnerships for certain bids and Chinese companies are part of that”. When asked about the deadlines for proposals, he responded, ” (the deadline for proposals) will probably be at the end of June or early July.”

Although the abundant reserves of Iraq present great possibilities, they also come with tight profit-sharing agreements, large upfront costs, and sizable political risks. Many international oil companies have questioned whether they will be able to make a profit in Iraq. One country comes to mind which would be able to take on these potential downsides: China.

China not only is ready to take political risks when it comes to energy investment, but is also promising domestic market for the commodities themselves. China has also served as the partner of choice for Iran, Iraq’s neighboring country, which last month signed a $3.4 billion liquefied natural gas deal with an unidentified Chinese consortium.

Shell and competitors such as Exxon Mobil corp. and Chevron Corp. are among 35 international companies that pre-qualified for the bidding process last year. Iraq is running two licensing rounds to help develop oil and natural-gas fields in order to boost state revenues over the next four years. The winners of the first bid round will be announced this summer.

Shell is no stranger to two of China’s largest oil companies as they already have joint ventures in northwestern China. Shell and PetroChina pumps nearly 10 million cubic meters of gas a day as of last September, in Changbei, China, once a joint venture has been made. Shell has said it wants to increase its involvement in China’s refining sector.

Shell may be trying to gain closer ties with Chinese oil companies in order to take advantage of China’s fast-growing market. As the world’s second-largest oil consumer after the United states, China has signed numerous multi-billion dollar deals to import petroleum and develop sources abroad.

“China is a key part of Shell’s long-term strategy to expand in faster-growing markets outside the west”, said Peter Voser, its chief financial officer. He also hinted at targeting other emerging markets such as India, Indonesia, and Turkey.

Despite talks of a partnership for oil in Iraq, Shell has announced that they were delaying or dropping some alternative-energy projects in China as too costly. While some joint-ventures are trying to come together, others are faltering. Lim Haw-Kuang, executive chairman of Shell Companies in China, said in Bejiing that because of the economic downturn, it decided to postpone a joint venture with Shenhua Group, China’s top coal producer.

Shell executives also confirmed that they have abandoned a foray in northern China into oil shale, a costly and technologically challenging type of oil to produce.

Source: www.AsiaEcon.org
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Source: www.asiaecon.org |


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