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South Korea’s top refiner SK Energy has dropped a plan to build a crude oil processing unit in China due to government price regulations.

SK Energy, which has a 35 percent stake in a naphtha unit project with China’s Sinopec Corp, will build a wind power plant instead of the crude distillation unit (CDU).

“The reason we participated in the stake in Wuhan naphtha unit was because naphtha is a product that is less price-regulated (by the government),” Kim Tae-jin, head of SK China was quoted as saying.

The Chinese government controls oil product prices sold by local refiners, forcing state-run Sinopec to post profit losses for several years.

Ever since the formation of the Public Republic of China (PRC), the energy sector has played an important role in the overall economic development of China. Before 1978, self-reliance was the main goal of economic policymaking but resulted in uncoordinated and imbalanced development. The damage caused by the Great Leap Forward was exacerbated in 1960 when, following growing tensions between the two countries, Sino-Soviet relations cooled. Without Soviet help, China hardened its self-reliant attitude and went on to develop its economy and energy resources on its own. Recognizing the harm done to the energy sector by the Great Leap Forward and the loss of Soviet aid, in January 1961 the Chinese Communist Party (CCP) Central Committee formulated guidelines for recovery. They included objectives for developing new energy reserves.

The wind power plant will be built in one or two regions in China, led by SK E&S, a sister company of SK Energy.

SK Energy Co., Ltd. is a Korea-based company engaged in the provision of petroleum, chemicals, lubricating oil and others. The company operates its business under two segments: petroleum and chemical. Its petroleum segment provides unleaded gasoline for automobiles, kerosene and gasoline for heating, bunker-C (BC) oil and others. Its chemical segment provides ethylene and para-xylene used as synthetic resin materials, styrene monomer used as synthetic fiber materials, and synthetic resins used for containers, films and automobile parts.

It is also involved in the lubricant business and petroleum exploitation business. During the year ended December 31, 2007, petroleum segment and chemical segment accounted for approximately 66% and 27% of total sales, respectively.

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US officials have time and again reminded New Delhi that it would be difficult to get Congressional approval for the implementing 123 Agreement finalized last July in an election year unless it comes up before the legislature before June-end.

India needs to sign an India specific safeguards agreement with the IAEA and get the approval of 45-nation Nuclear Suppliers Group (NSG) before the US Congress can give its go-ahead. Senior government officials in India have announced that it is likely that the NSG step will take at least around a month to be completed.

Officials have also announced that due to the fact that the deal has been stuck in limbo for many months, the initial favorable momentum that India had created at the NSG in favor of the nuclear deal is now no long present.

Even though the NSG step is a largely an US effort, India had also been talking to the NSG countries. Due to the political roadblock, there has been no movement on the NSG front in the last couple of months. There is also opposition to the nuclear deal from some NSG countries itself.

One of the original architect’s of the US-India nuclear deal, Ashley Tellis, has already gone on record declaring that the deal is now dead saying that the political timeline has already expired.

His judgment connects with the timeline afforded by higher-ranking US Congress members who had stated before that the 123 accord has to reach the US Congress for approval by July. The bill also has to lie in the US Congress for a minimal of two to three months before it can be taken up for a vote.

While acknowledging that time was short for getting final approval in the US Congress before President George Bush, who looks at the India deal as a major foreign policy achievement, leaves office in January, the US administration is making all efforts to do so.

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