Shell and CNOOC announce deal to build first polycarbonate production plant in...

Shell and CNOOC announce deal to build first polycarbonate production plant in Huizhou

Royal Dutch Shell Plc (LON:RDSA) have updated the market about their operations in China.

The firm said on Thursday that they signed a memorandum of understanding with China National Offshore Oil Corp (HKG:0883) to build its first commercial scale polycarbonate production plant.

The plant will be the first of its kind, will be situated in the South of China in a city called Huizhou.

“(Huizhou city government) is in touch with Shell and CNOOC for detailed investment and production plans,” said Liu Ji, mayor of Huizhou, on the sideline of a conference in Guangzhou on Thursday.

The deal that has been reached aims to build more production equipment at the new site in Huizhou and shows an active effort by the multinational to invest into China.

Shell have already made headways in Singapore for another plant in similar fashion to the one mentioned today, and this is being built at its Jurong Island Chemicals Plant as an interim step.

“(…)We have an advantaged route to production and are looking at investment in a number of commercial-scale units to serve the growing number of polycarbonate customers,” Thomas Casparie, Executive Vice President of Shell’s global chemicals business, said in the statement.

Shell’s December update

The firm told shareholders just before Christmas that it would cut its oil production sales.

The firm said that it can expect impairment charges off around $2.3 billion, in the fourth quarter.

Additionally, Shell trimmed its forecast for quarterly oil production sales as the firm has seen itself in tricky waters over the last few weeks.

The firm also added that it expects oil production sales of 6.5 million barrels of oil equivalent per day and 7 million boepd for the fourth quarter, compared with its earlier estimate of 6.65 million boepd to 7.05 million boepd.

The company had seen a slump in its third quarter trading, did report strong oil and gas trading however. Shell said that higher taxes would be bruising earnings by $500 million to $600 million in the fourth quarter.

New Credit Facility

Just a few days before the fourth quarter update, the firm announced that it would be constructing a new credit facility.

The firm updated shareholders about a $10 billion new credit facility. The new facility has been agreed with a total of 25 banks and replaces the existing framework valued at $8.84 billion.

It will also, in a first, have interest and fees linked to Shell’s progress in reached its short-term net carbon footprint target. Shell has targeted reduce its footprint by 2% to 3% by 2021.

Shell has set an ambition to reduce the Net Carbon Footprint of the energy products by around 50% by 2050 and by 20% by 2035  in a time of high environmental awareness.

“Bank of America and Barclays Bank (LON:BARC) acted as joint coordinators for the facility”.

The update that has been given is impressive, and could have benefits for both parties involved.

Shell seem to have made an active effort to promote efforts to invest into China in a time of tense global relations, however this is a move in the right direction for the FTSE 100 listed firm.