China National Offshore Oil Corp (CNOOC) and the Royal Dutch Shell Group (Shell) signed an agreement on Tuesday to expand their joint venture in Huizhou, South China's Guangdong Province, aiming to satisfy the growing domestic market, according to a statement on CNOOC's website on Tuesday.
The companies didn't disclose the value of the deal.
Under the agreement, which requires regulatory approval, Shell will join an ongoing CNOOC project to build additional chemical facilities adjacent to the current Nanhai petrochemical complex, which is owned by the existing joint venture in Huizhou, the statement said.
The joint venture, called CNOOC and Shell Petrochemicals Co, was established in late 2000. Shell Nanhai BV, a member of Shell, took a 50 percent stake in the joint venture, and Petrochemicals Investment Ltd, owned by CNOOC, took the other half.
The project includes the ongoing construction of an ethylene cracker, which will raise the Nanhai complex's ethylene production capacity by more than 1 million tons a year, about double its current capacity, according to the statement.
"Domestic petrochemical enterprises are opting to cooperate with international industry giants to obtain leading technology and access to finance," Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, told the Global Times on Tuesday. "This will be a continuing trend."
The move is also related to the company's market strategy, Lin said, noting that the deal is expected to lift the capacity of the joint venture, which aims to meet growing demand in China.
Also, with the local government's support in Huizhou, CNOOC might have lower operating costs there, such as in transportation, Lin noted.
The deal will be mutually beneficial, Liu Enqiao, a senior energy analyst at Beijing-based Anbound Consulting, told the Global Times on Tuesday.
Liu pointed to Shell's wide investment in China as a sign that the company sees a good future in the Chinese market.
For instance, Shell has about 1,100 gasoline stations in the country, which are operated by joint ventures.
