Showing posts with label Shell. Show all posts
Showing posts with label Shell. Show all posts

Saturday, May 14, 2011

Is Shell chased out of China by CNOOC?

Logotipo ShellImage via Wikipedia
A breaking story on Saturday in the Dutch daily De Volkskrant suggesting the Anglo-Dutch oil company Shell is being chased out of China by its Chinese partner, the state-owned CNOOC. Since in terms of investments it has been Shell's largest investment ever, certainly in China, the story is important enough. In the past Shell has invested also much in its relationships in China, making the question what is going wrong extra interesting.

A few remarks in advance. The story has been written by the journalist Fokke Obbema, who is working on the economic desk, but has no background in China. He went along with a Dutch ministerial delegation to China, headed by the minister of economic affairs Maxime Verhagen. I have been along with those trips a few times as a journalist and coming back with any slightly original story is a challenge.

De journalist did not ask CNOOC for comment, and even does not suggest he tried to get that. That should be a huge disclaimer: this kind of complicated stories have at least two sides, if not more. The story on the Dutch side is told by former Shell manager Frans van Gunsteren and is not publicly supported by Shell. Only an anonymous Dutch diplomat is quoted (but they would always do that, so should be discounted for that reason).

The generic stake of the story is: foreign companies are getting increasingly a tough time in China, when they are dealing with state-owned companies. In this case a 50/50 joint venture between Shell and CNOOC has build a 3 billion euro petrochemical installation in Southern China. The building started in 2006. CNOOC now wants to expand a nearby petrochemical installation with an investment more than double the existing Shell/CNOOC installation.

This time CNOOC only wants Shell to participate for 30 percent, and Shell does not want to. They want to keep expensive expats and foreign companies out, suggest Van Gunsteren.

To me, it sounds like a business conflict that is now blown out of proportions by Shell. But then, the Volkskrant story has only one side. Not sure if there will be a follow-up.

Shell - if they support the challenges made by their manager - wants to make the story bigger than it is in my view. Some foreign companies are doing well in China, some fail because they made a wrong assessment of the market. And some get in trouble with their local partner. There is a nice saying in Dutch: when to fight, two are to blame. We need to hear the CNOOC story.

(First published at Fons Tuinstra's home)


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