CEFC courts ‘teapots’ for first domestic acquisition

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.