OREANDA-NEWS. February 01, 2012. China’s top energy group and its partners Qatar Petroleum and Royal Dutch Shell agreed to push ahead with plans for a USD 12.6 billion refinery and petrochemical complex in east China which is likely to start before similar rival facilities.

China National Petroleum Corp (CNPC) said on Thursday it and its joint venture partners signed an agreement to cooperate further on the project while Chinese Premier Wen Jiabao was visiting Doha.

“The three parties will cooperate further to push for the implementation of the project. The investment is a major development that will deepen CNPC’s cooperations with a major Middle East resource nation and an international oil company,” CNPC, parent of PetroChina, said in a statement.

The project, which includes a 400,000-barrel-per-day (bpd) refinery and a 1.2-million-tonne-per-year ethylene complex, is one of several joint-ventures that China, the world’s second biggest energy consumer, hopes will provide the fuel for its expanding economy.

The other projects include ventures between Chinese energy firms and Venezuela’s PDVSA, Kuwait Petroleum International and Russia’s Rosneft.

China’s total refining capacity stood at around 10 million barrels per day at the end of 2010. It is likely to add another 3.7 million bpd between 2011 and 2015, industry officials said.

The CNPC project, to be located in the east coastal city Taizhou, won initial government approval in June.

Industry experts said Qatar Petroleum and Shell would have to work hard at negotiating a final deal that allows them to take part in the more lucrative fuel retailing.

China is hungry for fuel, but the refining business has long been dominated by state giants Sinopec and PetroChina and the government still sets fuel prices at the pump.

Without full access to wholesale operations and what happens at fuel stations, refiners often bear the brunt of thin or negative margins.

The only success so far is the refinery-petrochemical joint venture between top Chinese refiner Sinopec Corp, U.S. major Exxon Mobil and Saudi Aramco in the southern province of Fujian which took more than a decade to materialise.

But experts said CNPC may prove an easier partner than Sinopec and the negotiations are not likely to take decades as CNPC is keen to boost its refining capacity in southern China.

“The broad trend won’t change — to limit investors’ access to fuel marketing in favour of state majors,” said Yan Kefeng of Cambridge Energy Research Associates (CERA).

“But to CNPC, this might be slightly different — the project would mean CNPC is giving its partners chance to grab market share in competitor’s turf.”

CNPC has also partnered Venezuela’s state-run PDVSA for a refinery and petrochemical complex in Guangdong province, under which PDVSA will supply the crude and provide oilfield concessions to CNPC in Venezuela in return for a footfold in China’s vast fuel market.

But industry experts say the deal could be caught in the web of sometimes tense diplomatic relations between the United States, China and Venezuela.

Sinopec has partnered with Kuwait’s national oil company to set up a similar venture in Zhanjiang city. Industry experts expect negotiations for the final commercial contract to be lengthy as Sinopec could prove to be a tough negotiator and Kuwait Petroleum needs to find a global oil firm to partner with.