Shell's China Moves

The hilltop city of Yulin, about 500 miles southwest of Beijing, was once a strong point in the defensive wall that protected the Chinese heartland from the tribes to the north. An ancient fortress survives in the old part of the city, the Chinese characters for “Suppress the Barbarians” carved over its gate. Today, Yulin’s a boomtown in the oil- and gas-rich Ordos Basin. In the streets not far from the fortress walls, where men sell roasted goat heads from carts, young boys hand out brochures for apartment towers built for newly wealthy oil workers and coal miners. If fresh characters were carved into the old fortress gates now, they might say “Resource Barbarians Welcome!” Or they might simply be a pair of corporate logos: one for PetroChina, the publicly traded wing of CNPC, China’s largest oil company, and a second for its foreign partner, Royal Dutch Shell, the second-largest Western oil company.

A half-hour drive from the city is a new, white building that stands out in the desert scrubland. Clean and bright, it has offices, conference rooms, and a big second-floor terrace overlooking acres of neatly arranged tanks and piping. This is the Changbei gas field. An estimated $1.3 billion joint venture, the field is managed by Shell for PetroChina and produces more than 3 billion cubic meters of gas a year. Over a lunch of stir-fried chicken and snow peas, tangy local peaches, and green tea in the building’s high-ceilinged commissary, the plant’s two bosses, General Manager Xu Li, a Shell man, and PetroChina veteran Xu Yanming, his deputy, banter about Changbei. Xu Yanming, dressed more like a local merchant than an oil man—in slacks and a dark windbreaker—ribs Shell’s Xu, who has a degree from Oxford University and wears the standard blue, one-piece Changbei boiler suit.