THE WALL STREET JOURNAL: Shell and Kuwait Team Up to Focus On India, China (ShellNews.net) 23 March 05
By BENOIT FAUCON and SHAI OSTER
DOW JONES NEWSWIRES
March 23, 2005
LONDON -- Royal Dutch/Shell Group is joining forces with an arm of Kuwait Petroleum Corp. to make investments in the downstream sector, a move that could help the Western concern gain access to the emirate's oil riches.
The Anglo-Dutch oil giant said it signed a memorandum of understanding with Kuwait Petroleum International Ltd., the international refining and marketing arm of state-owned Kuwait Petroleum Corp., for future joint investments.
The partners will explore opportunities within the whole downstream value chain, from refining crude to retail fuel sales, Shell spokeswoman Susan Shannon said.
The alliance covers India and China, where Shell expects strong growth, she said. No specific projects are on the table at this time, Ms. Shannon added.
The deal comes as KPI rival Saudi Arabian Oil Co. moves ahead on joint-venture plans with Exxon Mobil Corp. for a refinery in China and talks for refineries in India.
Under terms of the alliance with Shell , KPI will supply oil to refining joint projects. Shell will bring its technology experience and scale as the independent oil company with the largest downstream business, Ms. Shannon said.
Earlier this month, Shell rival BP PLC signed a similar agreement with KPI, focusing on the high-growth market of China and elsewhere in Asia.
The Shell deal is part of Kuwait's plans to tap partners for strategic alliances, said Kamel Al-Harami, an industry analyst and former Kuwait Petroleum Corp. executive who is based in Kuwait.
Kuwait Petroleum Corp. has joined with Dow Chemical Co. on the petrochemicals side to build an ethylene and derivatives complex plant.
Last month, Shell said its reserves-replacement ratio -- a key indicator of future growth -- fell to between 15% and 25% in 2004, including year-end pricing impact and divestments, from 98% in 2003.
Kuwait controls 8% of the world's proven oil reserves, or 96.5 billion barrels, and produces 2.5 million barrels a day of heavy crude.
"We definitely want to build our position in Kuwait," Ms. Shannon said. "But the downstream agreement doesn't contain any dispositions regarding upstream activities." She added that Shell already has a minority stake in a concession in Kuwait's Northern Field led by Exxon Mobil and wants to expand to other fields.
Write to Benoit Faucon at benoit.faucon@dowjones.com
and Shai Oster at shai.oster@dowjones.com
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