Shell to expand Guangdong petrochemical complex

London-based Shell will further ramp up its presence in China by expanding its petrochemical complex in Daya Bay of Guangdong province's Huizhou, the global oil giant announced on Wednesday.

The expansion, which is expected to be completed in 2028, will ensure further value creation by increasing exposure to high-value differentiated products primarily for the fast-growing Chinese market, while benefiting from synergies with the existing plant and infrastructure, said the company.

The new facilities, primarily aimed at meeting domestic demand in China, will produce a range of chemicals that are widely used in the agricultural, industrial, construction, healthcare and consumer goods sectors, it said.

The decision has been made through CNOOC and Shell Petrochemicals Co Ltd (CSPC), a joint venture between Shell Nanhai BV and CNOOC Petrochemicals Investment Ltd that has been "a high-performing strategic partnership delivering returns, on average, significantly above minimum hurdle rate", it said.

Foreign investments are increasing their focus on China's petrochemical industry in recent years, as the nation has essentially removed restrictions on foreign investments in the oil and chemical sectors.

The stable business environment, well-established industrial base, and vast downstream market are attracting global multinational companies to ramp up their investments in China, said Fei Huawei, an analyst from a China National Petroleum Corp institute.

Fei expects that by 2030, China's demand for chemical oil will reach 198 million metric tons, a 30.7 percent increase compared to 2024, while annual demand for basic chemical raw materials is estimated to reach 169 million tons, a year-on-year increase of 11.1 percent in 2024.

According to the International Energy Agency, China is driving the global petrochemical industry through a momentous period of transition, with an expansion speed and scale dwarfing any historical precedent.

China's rapid development of the petrochemicals sector is drawing greater interest from multinational companies seeking a foothold in the world's second-largest economy. In addition to Shell, Saudi Aramco, BASF and other multinational companies are also expanding their investments in the country, cooperating with domestic refining and petrochemical companies for a larger share in its petrochemical market.

Shell's announcement to expand its petrochemical complex in Daya Bay is a clear signal of the company's confidence in China's long-term economic prospects and its growing market potential, said Wang Lining, director of the oil market department under the economics and technology research institute of CNPC.

Despite global uncertainties, foreign investment in China remains strong, driven by the country's robust industrial base, vast consumer market and improving business environment, he said.

According to the institute, China's demand for petrochemicals is expected to remain strong through 2040, and is projected to grow at a rate exceeding 10 percent annually.

This presents substantial opportunities for both domestic and foreign enterprises operating in the sector, it said.

BloombergNEF estimates that China's petrochemical feedstock demand, driven by continuous growth of downstream derivatives such as plastics, is expected to almost triple by 2050 from the 2021 levels.

According to Shell, the expansion will include a third ethylene cracker with a planned capacity of 1.6 million tons per year of ethylene, a key building block to make plastics, and associated downstream derivatives units producing chemicals including linear alpha olefins, it said.

This investment also includes a new facility which will produce 320,000 tons per year of high-performance specialty chemicals, such as polycarbonates and carbonate solvents, critical for everyday life, it said.

"For more than two decades, CSPC has provided high-value products to the market, becoming one of the largest petrochemical joint ventures in China," said Huibert Vigeveno, Shell's downstream, renewables and energy solutions director.

"This new investment is a key enabler to realize CSPC's transformation strategy toward more premium and highly differentiated chemical products. It is consistent with Shell's strategy to pursue targeted growth at advantageous locations. It also demonstrates our strong partnership with CNOOC."

This investment will contribute to CSPC's competitiveness by extending its value chains, drive further integration with the existing site, and enable greater innovation capability to meet customer demand in the fast-growing Chinese market, said Shell.