BP Amoco may acquire more China interests

After recently taking a 2.2% stake in PetroChina, the holding company of China National Petroleum Co. (CNPC), at a cost of just under $600 million, BP Amoco PLC now says it is looking to acquire a stake in China National Petrochemical Corp. (Sinopec) when the Chinese oil company launches its initial public offering (IPO) this summer.

br>After recently taking a 2.2% stake in PetroChina, the holding company of China National Petroleum Co. (CNPC), at a cost of just under $600 million, BP Amoco PLC now says it is looking to acquire a stake in China National Petrochemical Corp. (Sinopec) when the Chinese oil company launches its initial public offering (IPO) this summer.

Although BP Amoco is refusing to comment on the size of the stake it is seeking to purchase, a recent report in the Financial Times of London says BP Amoco has agreed to take a 2.2% stake in PetroChina, as well. That holding is expected to cost several million dollars.

The news follows a meeting last week between BP Amoco Chief Executive John Browne and Chinese Premier Zhu Rongji. BP Amoco is so far refraining from saying little more than that the acquisition of a stake in Sinopec "could be a way of enhancing our presence in China," noting that it expects "considerable interest" to be shown by foreign investors in the IPO.

"While the details of the IPO have not yet been published, and there may be considerable competition for this offer, in principle, BP would be prepared to invest in the Sinopec IPO," said BP Amoco.

Sinopec is thought to be looking to raise at least $2 billion from the IPO, which is expected to take place in August or September.

The Chinese government will mostly likely be grateful to receive news of BP Amoco's intent to participate in Sinopec's IPO. The multinational energy giant's recent acquisition of a stake in PetroChina provided a significant boost to the mainland's largest oil company, whose IPO in April came under heavy pressure after US labor unions urged investors to boycott the offering because of PetroChina's investments in Sudan.

Petrochemical ventures
Analysts say that holding stakes in both PetroChina and Sinopec will give BP Amoco a distinct advantage when it comes to bidding for new projects or plant upgrades in China.

BP Amoco Chemicals last week announced that it had signed an agreement with PetroChina to increase the capacity of Dushanzi Petrochemical Co.'s polyethylene plant at Dushanzi, Xinjiang. Combined linear low-density and high-density polyethylene capacity will be increased to 150,000 tonnes/year from 120,000 tonnes/year.

The Dushanzi plant will be expanded using BP Amoco technology, and the project will be completed in 2001.

Meanwhile, BP Amoco is now looking to accelerate the construction schedule for the giant joint-venture ethylene cracker to be built near Shanghai. John Morgan, venture director of the Shanghai ethylene cracker, says, for now, BP Amoco is sticking to its original schedule of forming a JV with Sinopec and CNPC next year and commissioning the project in 2005. But Morgan said, "We are getting a lot of support from both the central government and the Shanghai local government and are expecting the timetable to be brought significantly forward."

At the same time, the size of the project�to be the second largest foreign investment in China behind Royal Dutch/Shell's mammoth $4.5 billion petrochemical complex set to be built in southern China�has been increased, with capacity now standing at 900,000 tonnes/year of ethylene.

Originally, the plan was to build a 650,000 tonne/year cracker. The increased capacity also means the value of the project is expected to rise to around $3 billion from the original $2.5 billion.

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