BEIJING: Kuwait faces a possible second setback on a major oil refining project before the end of this month with a Chinese joint venture worth up to $9 billion facing high environmental hurdles and a wary central government.
A key environmental impact assessment (EIA) report on the refinery that Kuwait Petroleum Corporation and Sinopec Corp. want to build in Guangdong province is due by month’s end, just days after KPC itself scrapped a tender to build a $15 billion project back in Kuwait.
Following the collapse in oil prices, Kuwait has plunged into a political and economic crisis, and projects worth at least $33 billion have been canceled since December last year, including a $17 billion deal with Dow Chemical.
At the same time Kuwait’s crude oil exports to China fell in February to only one-third the 190,000 barrels per day peak touched back in August and September, and it may struggle to reach a targeted 500,000 bpd without a foothold in the refining sector.
The refinery in Nansha, a suburb of the provincial capital Guangzhou, has been mired in controversy since a first agreement was signed in 2005. Environmental concerns have already forced the facility out of Huangpu, another Guangzhou suburb, and media reports say it could now be moved again, requiring another round of assessments.
Cai Ronghua, the head of the National Development and Reform Commission’s petrochemical bureau, said on Sunday that China would adhere strictly to the approval procedures.
“Whether this project goes ahead or not will depend on land use requirements, environmental protection requirements and other safety standards, and when it meets those requirements it will go ahead,” Cai told a conference hosted by the government agency.
Sinopec declined to comment on the project. KPC officials were unavailable for comment in both China and Kuwait. Pollution concerns aside, the project could also face central government resistance as Beijing’s policymakers move to block new refinery building amid fears that expanding the sector will leave China’s flagship oil companies struggling with overcapacity.
The planned facility includes a refinery that can process 15 million tons a year (300,000 bpd) and a petrochemical plant churning out products like ethylene and PVC for the local market.
Environmentalists object that the proposed site is close to state protected wetlands and the densely populated and already polluted Pearl River Delta region, including Hong Kong and Macao.