Oil giant Royal Dutch Shell has bought a 75-per-cent stake in China's largest
privately owned lubricant oil company Tongyi, making it the third-largest in
China's lubricants market, the firm said on Friday.
"The transaction will increase Shell's global finished lubricants volume by 8
per cent, giving it approximately 16 per cent of the global branded finished
lubricants market," the company said in a statement, without giving the
financial details of the deal.
"China is the fastest-growing consumer lubricants market in the world, which
is to grow annually by 10 per cent at least until 2010," said David Pirret,
executive vice-president of lubricants at Shell. "Growing our business in such
an important market is critical to extending our leadership in the world
market."
"It is also in line with Shell's strategy of profitable downstream through
leveraging our portfolio in high-growth markets."
Shell said its lubricants business in China has experienced strong growth
over the past few years. It has three lube oil blending plants in China with a
total capacity of about 200,000 tons per year.
Tongyi has grown rapidly in 13 years to become China's third-largest
lubricants company. It has a network of 2,000 distributors and 90,000 retailers
across China and has three lube oil blending plants with a total annual capacity
of 600,000 tons.
Commenting on the deal, Lim Haw-Kuang, executive chairman of Shell China,
said: "Taking a major stake in a successful Chinese company is a clear
demonstration of Shell's ability to deliver on its strategic growth aspirations
in the east and positions us as one of the leading international energy
companies operating in China today."
This year the Dutch company plans to invest US$500 million in both the
upstream and downstream sectors of oil production to increase its presence in
the competitive Chinese energy market.
Lim said Shell would spend the money on everything from oil and gas
exploitation to downstream refining and oil retailing.
The company plans to add more than 200 retail sites in East China's Jiangsu
Province through its joint venture with Sinopec over the next six months. Shell
has an agreement with Sinopec to build 500 sites in Jiangsu. Of those, 200 have
been established.
In its upstream business, Shell is working with PetroChina to develop the
Changbei gas field in Northwest China's Shaanxi Province. The project is
expected to supply gas to Beijing and Tianjin municipalities, and Hebei and
Shandong provinces before 2008.
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