Royal Dutch Shell PLC (NYSE: RDS.A) has stepped into China's refining business as the National Development and Reform Commission approved a ¥80 billion joint project in Taizhou, Zhejiang province, Shell China president Lin Haoguang said.

CNPC, PetroChina Co's (NYSE: PTR, SHA: 601857, HKG: 0857) parent, will own 51% of the project, which is expected to refine 20 million tons of oil and produce 1.2 million tons of ethylene a year. Shell and Qatar Petroleum International will equally share the remaining 49%.

Shell's business in China had been confined to the sale of refined oil prior to the announcment of the Taizhou project. It had gone to great lengths to build refineries in the country, but three previously planned partnerships with Sinopec Corp (NYSE: SNP, SHA: 600028, HKG: 0386) and CNOOC Ltd (NYSE: CEO, HKG: 0883) with this aim were all halted halfway.

On the contrary, Shell has been retreating from downstream business in other markets. It sold its refineries in Finland and Germany in late 2010, and sold most of its downstream business in Africa, Britain, Chile and Canada in 2011. It shut down its fuel processing facility in Hamburg earlier this year and has plans to soon close its refinery in Sydney.

Shell's strategy in China though showcases what the world's most populous nation means to the company. Shell currently operates 331 directly-run gas stations in China and 500 joint venture station with Sinopec in Jiangsu province.

Taizhou, Zhejiang province, where Shell's joint refinery is based, borders Jiangsu province.



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