Most Chinese oil companies have set up trading arms in the major commerce centres of the oil trading world.
(PRWEB UK) 31 July 2012
Talks with the Ecuadoran government and the other partners in PetroChina's project, Petroleos de Venezuela and PetroEcuador, were preliminary, but press reports suggested that PetroChina was eager to become a partner in the US $12.5 billion project.
The 300,000 b/d Pacifico refinery has long been planned at El Aromo, south of Guayaquil, and besides meeting Ecuador’s refined products needs, the plant will be in a prime position to export its products into the Pacific Rim. This capability is likely what attracted PetroChina to this potential investment.
Jeffrey Kerr, GlobalData’s Managing Analyst for Downstream Oil & Gas, gives his reasons:
“The Chinese oil companies have looked abroad for assets in which to invest over the last decade for many reasons, chief among them as hedges against price controls at home. Chinese oil companies have built, and are continuing to build, sophisticated refining capacity in a bid to cover increasing demand for gasoline, diesel and jet fuel from a rising middle class as the country grows richer.”
During 2000, China’s total refining capacity was 4.5 million b/d and the country was a net importer of refined products from many of its neighbours. By the end of this year, with new-build refinery construction and capacity additions in place, China’s total refining capacity is expected to be just under 10 million b/d. By 2017, provided all planned capacity additions are built, the country could see its total refinery capacity rise to 13.5 million b/d. By contrast, the United States will have 19.1 million b/d of refining capacity by 2017.
PetroChina, and parent Chinese National Petroleum Corporation, have been especially active over the last decade, purchasing a 49% stake in Japan’s Osaka refinery from Nippon Oil in 2009; a 50% stake in Ineos Refining that included plants in Grangemouth (UK) and Lavera (France); a 67% interest in PetroKazakhstan, including its Shymkent refinery; and a 22.76% stake in Singapore Refining Company. PetroChina is also the majority partner in the Adrar refinery in Algeria.
Kerr cites the rumour that PetroChina is “kicking the tires” of Valero’s refinery in Aruba in another potential purchase. This refinery was shut down back in April owing to dismal margins. However, he explains that “PetroChina can effectively hedge its results in these markets outside of China since, in most cases the company will be allowed to pass along crude oil price increases to customer through higher refiner product prices.”
Sinopec and South Africa’s PetroSA are in preliminary discussions about jointly building a 380,000 bbl/day refinery in Coega Bay, South Africa. Tentatively scheduled to be complete by 2019-2020, this refinery would run Atlantic Basin crude oil streams and be in a prime position to not only meet South Africa’s refined product needs, but would be a trading asset in the Atlantic and Indian Oceans.
Sinopec has a 37.5% interest in Saudi Aramco’s 400,000 bbl/day refinery at Yanbu, which is under construction and slated to start up by 2015. Sinopec became the minority partner in this project after ConocoPhillips pulled out in 2009. Sinopec is also reportedly buying a 10% stake in Spanish integrated oil company Repsol, although that deal has not closed yet.
Chinese oil product demand has grown steadily since 2004, with gasoline demand peaking in February of this year at 1.9 million b/d, according to International Energy Agency data. In contrast, China’s February 2004 gasoline demand was 1.1 million b/d.
Chinese diesel/gas oil demand likewise peaked at 3.6 million b/d in November of 2011, from 1.8 million b/d in January of 2004. The country’s kerosene demand hit its peak demand at 357,000 b/d in January of 2011, from January 2004’s level of 223,000 b/d.
Kerr cites the smoothing of returns as a “laudable goal” for these companies, and especially their publically-traded arms, but there are other reasons for Chinese firms to venture abroad. Most of these companies have set up trading arms in the major commerce centres of the oil trading world in London, New York, Switzerland, Singapore, Dubai and Houston, and are actively engaged in trading cargoes, barges and pipeline positions of crude oil and refined products.
“By having physical assets in place in key locations around the world along with trading acumen, the Chinese companies are in a much better position to supply the needs of an increasingly energy-hungry populace. They are diversifying their presence and focusing on markets where they can supply refined products to their home, while at the same time supplying much needed capital to regions in need of it.”
Kerr reflects: “China’s oil companies are putting their stamp on the global energy marketplace, and by building a global trading presence, the Chinese oil companies seem to be positioning themselves to compete with the established Western companies well into the 21st century.”
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