CONFIDENTIAL COMMERCIAL IN CONFIDENCE
BP AND SHELL INTERESTS IN CHINA
BP
Much of BP's involvement is being scaled down, because of the high risks and high costs involved in many of the prospects and the low potential in some areas. In many regions BP will fulfil its commitment to seismic and drilling but not take further action. It summarises its strategy (in strictest confidence) for Offshore, in particular the North China Basin, as a Managed Exit to be completed by the end of 1993. There is therefore unlikely to be any effect on BP's long term interests in this sector.
Onshore, BP's key interest is the Tarim Basin in the Taklaman desert, which has just been opened to foreign bids. It is intending to obtain data enabling it to screen for potential gas reserves by building relations with the China National Petroleum Corporation (CNPC), the onshore petroleum arm of the Ministry of Energy. It might therefore be damaging to BP's prospects if relations were to become difficult. However, CNPC is also keen to expand into downstream oil through joint ventures, which implies that there might be an incentive to maintain good commercial relations with the West.
Shell
Shell is involved in two offshore exploration partnerships, most importantly one with Phillips in the South China Sea (Guandong Province) and one with Esso. The Phillips consortium has just begun developmental work on two discoveries totalling some 150 million barrels. the China National Offshore Petroleum Corporation is also a partner. Onshore Shell has established a small exploration team in conjunction with the CNPC.
In both cases
Downstream Shell has a regular contract with the China National Chemicals Import Export Corporation (Sinochem) to supply crude oil for processing. Over 4 million barrels of product were supplied in 1991. Shell and five Chinese partners are engaged in a feasibility study for an oil refinery and petrochemical complex to be situated at Aotou in Guandong. Shell has a 50% interest in the project, which will entail investment of around $5 billion. The study should be complete by May of this year, with the complex scheduled to
on stream in stages from 1998 to 2000.
Shell also does significant trade in coal from China.
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