A Chinese unit of Royal Dutch Shell plc RDS.A recently received a license from the Chinese government to trade oil products in its domestic wholesale market. The license will provide Shell the opportunity to independently buy and sell oil products in the Chinese market, which has been dominated by local oil companies. As Shell does not have a license to import oil, the company will have to buy the products from domestic suppliers.
Rising Global Presence in Domestic Market
This move from the Chinese government highlights Beijing’s efforts to involve international players in the energy sector, which can increase competitiveness in the domestic market. In this regard, last December, state-run China National Offshore Oil Corporation’s subsidiary CNOOC Limited CEO signed agreements with nine global oil companies for exploring the Pearl River Mouth Basin, located in southern China. U.S. energy giants like Chevron Corporation CVX and ConocoPhillips COP, Norway's Equinor and France's TOTAL were four of the nine companies with whom the deals were signed.
Companies like ExxonMobil and Saudi Aramco have also won trading licenses in China via their joint venture with state-run Sinopec.
Shell’s Presence in China
Currently, Shell has presence in the country through more than 1,300 retail stations, which are both in the form of sole ownership and joint ventures. The company is involved in a joint venture with China National Offshore Oil Corporation, which operates a petrochemical complex, located in the southern Guangdong province, having 2.2-2.3 million metric tons per year of ethylene production capacity.
Also, it has an integrated gas project, Changbei II, currently under construction, which is expected to come online after 2020. The company has another project in its kitty, namely Nanhai China Chemicals Geismar AO4, which was originally scheduled to start-up in the fourth quarter of 2018.
Price Performance & Zacks Rank
Headquartered in The Hague, Netherlands, Shell’s stock has lost 13.4% in the past year compared with 10.9% fall of the industry it belongs to. The company currently carries a Zacks Rank #5 (Strong Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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