OT - Exxon, Aramco, China venture costs rise to $5 bln
BEIJING, March 30 (Reuters) - Saudi Aramco and U.S. giant ExxonMobil Corp.'s first big Chinese downstream oil venture has grown to $5 billion, much more than planned, the firms said on Friday as they closed the books on 12 years of talks.
When the venture with top refiner Sinopec Corp.(0386.HK: Quote, Profile , Research) was initially agreed in 2005, estimated investment for the refining and petrochemicals units in southeastern Fujian was $3.5 billion.
Since then, the partners have added a marketing venture with 750 filling stations and a network of terminals, while refinery costs have risen worldwide because of a tight contractor market and escalating prices for raw materials.
Speaking after a ceremony to commemorate final approval of the deal, Sinopec Corp.'s President Wang Tianpu told Reuters the cost difference was due entirely to the retail and wholesale operation. Aramco and Exxon Mobil declined immediate comment.
The deal is a coup for Exxon Mobil (XOM.N: Quote, Profile , Research), the world's biggest publicly traded firm, which gets a rare and coveted foothold in the second-largest oil market.
It also gives the top oil exporter Saudi Arabia a guaranteed customer for its future output.
But it may also mark the end of an era of cooperation with major Western oil companies and clear preference for deals with major resource nations, leaving firms without any downstream ties like Chevron (CVX.N: Quote, Profile , Research) or ConocoPhillips (COP.N: Quote, Profile , Research) in the cold.
"This (deal) was one of the few survivors from China's previous round of foreign cooperation," said Yan Kefeng, of Cambridge Energy Research Associates (CERA).
"The message is very clear now: new JVs will be geared towards such resource players like Venezuela, Russia, Kuwait."
China, an oil exporter 15 years ago, is increasingly anxious about its dependence on imports, now near the halfway point. Saudi Arabia supplies about 16 percent of its imported crude.
Last year it pledged a host of deals with Russian firms. Earlier this week Venezuela, which hopes eventually to sell more than 1 million barrels a day to China, agreed to open its oilfields to Chinese investment and to help build new refineries.
CHINA DOMINANCE IN FUEL MARKETING
Despite a flurry of interest in the 1990s, oil majors have also been slow to move in due to China's tight hold on domestic fuel distribution and retail prices.
The Fujian sales venture was only finally agreed after new rules opened the sector to foreign competition from 2007, Exxon Mobil's China head P.C. Tan told Reuters last week.
The changes were part of commitments China made when it joined the World Trade Organisation in 2001.
Sinopec's dominance is evident in its 55 percent stake in the Fujian sales firm. Exxon and Aramco each holds 25 percent of the refinery and petrochemical projects but a smaller 22.5 percent each in the marketing venture.
And Sinopec has called off talks with Exxon for joint fuel distribution in Guangdong, China's wealthiest province despite a preliminary alliance agreed in 2000 when Exxon bought into Sinopec's IPO.
Exxon sold its 3.7 percent stake in Sinopec in early 2005.
"There is no further plan for another joint venture with Exxon. The Guangdong venture has been called off," Sinopec Chairman Chen Tonghai told Reuters at the ceremony.
But he said talks were ongoing for a second joint venture refinery in eastern China's Shandong province with Aramco, exepcted to get about 25 percent stake in the 200,000 bpd plant.
The Fujian project will upgrade and triple the capacity of the existing Fujian oil refinery to 240,000 barrels per day (bpd) and build a facility to unload supertankers. It is due to start production in early 2009, processing primarily sour Arabian crude, a joint statement by the three companies said.
They will also build an 800,000 tonnes per year (tpy) ethylene cracker and associated chemical units.
