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 cancelled 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 targetted 500,000 bpd without a foothold in the refining sector. Saudi Arabia is already part-owner of a major refinery.
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 tonnes 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. Expressions of concern from Hong Kong’s government and Guangdong delegates to China’s parliament have echoed those fears.
But campaigners are concerned the government’s efforts to keep the project quiet are making its impact harder to assess.
“Because there is not much information available publicly so far, it is hard to discuss,” said Edward Chan, Greepeace’s campaign manager in Hong Kong.
The project has yet to be formally approved, but preliminary construction has already gone ahead, prompting green activists to complain the environmental watchdog is being strong-armed.
The Guangdong authorities have already earmarked almost $1.5 billion this year to lay roads and build infrastructure for the facility, the Guangzhou-based Southern Daily newspaper reported.
The NDRC’s Cai said that controversy was being “stirred up” by the media, and the project should not have to face the problems that hit Xiamen, a city in neighbouring Fujian province.
In 2007, a Xiamen paraxylene (PX) plant expected to attract investment of more than 10 billion yuan ($1.46 billion) was dropped when rumours about the toxicity of PX led to public protests and a collapse in house prices.
“The PX project had people who weren’t being objective assessing it,” Cai said, according to a recording of the meeting obtained by Reuters. “We shouldn’t accept inappropriate suggestions just because of safety issues.”