Statement re BP and Sinopec
BP Amoco PLC
11 September 2000
BP TO INVEST $400 MILLION IN SINOPEC, AHEAD OF
FURTHER STRATEGIC EXPANSION IN CHINA
As part of its strategy of continuing expansion in one of the world's fastest
growing economies, BP today announced plans to invest up to $400 million in
the upcoming China Petroleum and Chemical Corporation (Sinopec Corp.) initial
public offering (IPO) scheduled for mid-October, 2000. Sinopec is China's
largest integrated petroleum and petrochemical company.
Separately, BP and Sinopec Corp. signed a memorandum of understanding to
extend their strategic co-operation in downstream fuels retailing, LPG
distribution and marketing; PTA (purified terephthalic acid) manufacturing and
sales; and to develop options for co-operation in the upstream and for the
integration of refining and petrochemical activities in East China. These
projects will add to a number of investments and projects already under way in
China.
Both companies have agreed in principle to form a joint venture to acquire,
revamp or build 500 fuels service stations in the Zhejiang Province, East
China. The dual- branded service stations will retail gasoline produced by
Sinopec and sell other petroleum products supplied by each partner.
The development of a project to build a world-scale PTA manufacturing facility
will be jointly undertaken. Ideally this plant would be progressed with and
integrated into the Caojing ethylene cracker project.
It is envisaged that the management of the proposed joint ventures will be
shared between BP and Sinopec and organised and operated mainly in line with
other BP business unit disciplines but accountable to both Sinopec and BP.
Commenting on the announcements, BP chief executive Sir John Browne said:
'This agreement is another major strategic step for BP in China. It will
significantly enhance our relationship with one of the leading Chinese
integrated oil companies and add to the portfolio of very good investments and
projects we already have in China.'
Mr Li Yizhong, Chairman of Sinopec Corp., said: 'Sinopec has worked
successfully with BP for many years. We believe that this relationship will be
significantly strengthened by BP becoming a strategic investor in Sinopec and
together we will be able to continue building strong, competitive and
profitable businesses.'
Dr Gary Dirks, president and chief executive of BP China, added: 'The
development of strategic relationships with the leading players in the oil
industry is the key to building a successful business for BP in China. BP and
Sinopec now have an impressive range of projects and areas of co-operation
that will support the development of a strong petroleum and petrochemical
industry, which will benefit our customers, our shareholders and China as a
whole.'
Notes to Editors:
SINOPEC
Sinopec is an integrated petroleum and petrochemical company with upstream,
midstream and downstream operations. Based on total operating revenues from
its continuing operations of RMB 213.0 billion (US$25.7 billion) in 1999,
Sinopec is the largest petroleum and petrochemical company in China and one of
the largest in Asia.
Sinopec is the largest refiner, distributor and marketer of gasoline, diesel,
jet fuel and most other major refined products in China and in Asia.
Sinopec is also the largest producer and distributor of petrochemicals in
China.
In addition, Sinopec explores for, develops and produces crude oil and natural
gas, principally to supply its refining and chemical operations.
BP IN CHINA
BP is one of the world's largest energy and petrochemicals groups and has so
far invested over US$2.5 billion in China, making it the country's largest
foreign oil company investor in China. This excludes IPO investments. In March
BP took a 2.2 per cent equity position in PetroChina, another major integrated
oil company, through its IPO.
BP employs over 700 people in China and is involved in joint ventures that
employ over 2,200. BP has a wide range of existing investment and business
activities in China, working with the country's three major integrated oil
companies.
Upstream activity
BP Operates the Yacheng-13 gas field in the South China Sea (BP 35 per cent,
China National Offshore Oil Corp. 51 per cent and Kufpec 14 per cent). This
supplies 300 million standard cubic feet a day (scf/d) of gas for power
production in Hong Kong via a 780-km. pipeline, and 50 million scf/d to FCCH
on Hainan Island via a 50-km. pipeline
Liu Hua oil field (BP 24.5 per cent, CNOOC 51 per cent and Kerr McGee 24.5 per
cent) produces some 25,000 b/d (gross). The floating production facility,
storage and offshore loading system sits in 300 metres of water and at the
time of it's development won a number of technology awards as a deep water
development.
QHD (CNOOC 51 per cent, Texaco 24.5 per cent and BP 24.5 per cent) is a heavy
oil project, currently under development, in the Bohai Bay. It is expected on
stream in late 2001. Gross recoverable reserves are approximately 200 million
barrels and peak production is expected to be 70,000 b/d (gross).
Gas & Power activity
BP and PetroChina have just concluded framework agreements for establishing a
gas marketing joint venture. A key objective of the joint venture will be to
build an LNG terminal in the Shanghai area.
A project to deliver natural gas via a 2,400-km. pipeline to North China from
the giant Kovitkinskoye field in Irkusk is being progressed. The pipeline will
transport 20 billion cubic meters a year of gas and first gas should reach the
market by end-2007.
Petrochemicals activity
BP has been a successful licensor of production technology in acetic acid,
polyethylene, polypropylene, PTA and acrylonitrile in China and signed 23
licence agreements since 1973.
An acetic acid joint venture called Yaraco was established in December 1995
between BP (51 per cent), Sinopec's Sichuan Vinylon Works (44 per cent) and
Chongqing Municipality (5 per cent). The plant came on stream in December 1998
and has been extremely successful. It paid a small dividend in its first year
of operation. The plant capacity has already been extended to 200,000 tonnes a
year.
A world scale PTA plant (BP 85 per cent) will commence construction shortly at
Zhuhai. The total capital investment is currently estimated at $355 million
and production is planned to start in the first quarter of 2003.
BP Chemicals is conducting a major feasibility study, in partnership with
Sinopec's Shanghai Petrochemical Company Limited, to develop a $2.5 billion
naphtha ethylene cracker project in the Shanghai area. Approval in principle
to increase the planned ethylene capacity from 650,000 to 900,000 tonnes a
year with the introduction of polypropylene was granted earlier this year.
Downstream activity
A framework agreement was recently agreed with PetroChina to form a retail
fuels joint venture with the goal of building or converting 150 sites a year
to create a 1000-site network by 2007.
BP is the biggest LPG importer in China. This position will be maintained with
the commissioning of a 250,000-tonne bulk-breaking facility at Ningbo in mid-
2002.
With the acquisition of Castrol, BP will have a lubricants sales base of
around 60,000 tonnes a year, and a 25,000-tonne-a-year blending plant. Both BP
and Castrol are participating in the premium lubricants market and together
have a market share in this sector of 8 per cent.
Air BP is a 35 per cent equity holder in the Cheng Yuan joint venture at
Shenzhen Airport and is a 24.5 per cent equity holder in the Bluesky joint
venture, which supplies fuel to 16 airports in South China across five
Provinces. The combined volume of the two joint ventures covers about a
quarter of China's national jet fuel demand.
BP has a 9.4 per cent equity stake in Zhenhai Refinery. The majority
shareholder is Sinopec.
The agreements described in this press release are subject to the execution of
definitive agreements between the parties, and to all relevant government
authorisations and approvals.
A registration statement relating to the shares of Sinopec has been filed with
the United States Securities and Exchange Commission, but has not yet become
effective. Sinopec's shares may not be sold nor may offers to buy be accepted
prior to the time the registration statement becomes effective. This press
release shall not constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of Sinopec's shares in any state or country
in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such state or
country.
In addition, this press release is not an offer of securities in the United
States; securities may not be offered or sold in the United States absent
registration under the securities act or an exemption therefrom. Any public
offer of securities to be made in the United States will be made by means of a
prospectus, which may be obtained from the issuer. The prospectus will contain
detailed information regarding the company and management, as well as
financial statements. The issuer intends to register a portion of its proposed
offering in the United States. Neither this document nor anything contained
herein shall form the basis of any contract or commitment whatsoever.
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