CEFC courts ‘teapots’ for first do­mes­tic ac­qui­si­tion

New Straits Times - - Business World -

Pri­vately-run con­glom­er­ate CEFC China En­ergy has ap­proached sev­eral in­de­pen­dent Chi­nese oil pro­ces­sors in seek­ing to ac­quire its first do­mes­tic re­fin­ery op­er­a­tion, its next move to­wards be­com­ing a global in­te­grated oil player.

New de­tails of CEFC’s at­tempts to buy a re­fin­ery in China come less than three weeks af­ter the lit­tle-known Shang­hai-based firm an­nounced its first ma­jor up­stream oil in­vest­ment, a US$900 mil­lion (RM4 bil­lion) deal for a four per cent stake in an Abu Dhabi oil­field.

Talks with a hand­ful of the small in­de­pen­dent re­fin­ers known as “teapots” are just get­ting started, but CEFC’s ef­forts are a rare early ex­am­ple of a pri­vate Chi­nese in­vestor look­ing to cash in on Bei­jing’s pol­icy en­cour­ag­ing small op­er­a­tors to ven­ture into the global oil mar­ket to take on estab­lished state-run ma­jors such as Sinopec Corp.

Chair­man Ye Jian­min told a board meet­ing last July that CEFC aimed to be­come a sec­ond Sinopec — China’s sec­ond­biggest oil and gas ma­jor and Asia’s largest re­finer — by ac­quir­ing global as­sets and con­sol­i­dat­ing teapot re­finer­ies.

“CEFC has made it clear that it wants to in­vest in re­fin­ing and held meet­ings with us,” said one teapot ex­ec­u­tive.

Ye’s team has made fre­quent vis­its to Shan­dong prov­ince, China’s hub for teapots, court­ing at least four com­pa­nies, in­clud­ing largest teapot re­finer Shan­dong Dong­ming Petro­chem­i­cal Group and two small plants in the port city of Rizhao.

More re­cently, CEFC has a new tar­get, lo­cal gov­ern­ment-backed Shan­dong Hengyuan Petro­chem­i­cal Co, which owns a 70,000 bar­rels-per-day plant in Linyi and a con­trol­ling stake in a re­fin­ery in Malaysia.

All the plants CEFC has ap­proached so far have Bei­jing’s green­light to im­port crude oil, part of more than 20 lo­cal re­fin­ers that be­gan emerg­ing as mar­ket play­ers in late 2015, help­ing to lift China’s crude oil pur­chases to an all-time high last year.

A re­fin­ery in the world’s sec­ond-largest oil con­sumer would add to an as­set net­work CEFC had built over the past two years — a Ro­ma­nian re­fin­ery, ser­vice sta­tions in Europe, an oil­field in Chad and the Abu Dhabi oil­field stake — said in­dus­try ex­ec­u­tives.

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