• Thu
  • Aug 21, 2014
  • Updated: 10:07am

CNPC set to sign deal to buy Malaysian fuel

PUBLISHED : Wednesday, 15 July, 2009, 12:00am
UPDATED : Wednesday, 15 July, 2009, 12:00am

China National Petroleum Corp (CNPC) is scheduled to sign a multibillion-dollar, 20-year deal today to buy fuel from what is expected to be Malaysia's largest oil refinery, part of an effort to enhance energy security and hedge domestic fuel price risks, sources said.

The mainland's largest oil and gas producer is also in talks to buy a stake in the planned US$10 billion refinery, which is being developed by privately owned Merapoh.

Building of the refinery in Kedah, northwest Malaysia, is to begin later this year and be completed by 2013. It will have a daily processing capacity of 350,000 barrels of crude oil.

CNPC signed a memorandum of understanding in late 2007 to buy all of the Malaysian refinery's output of products including petrol, diesel and kerosene. At the time, Merapoh estimated the deal would be worth US$6 billion a year.

Merapoh says the project will be funded by local and international financial institutions in addition to investors from China, Dow Jones reports.

A Merapoh source said yesterday the agreement to be signed today would include CNPC's commitment to buy fuel but not an investment in the refinery.

'They are still in talks on CNPC's wish to take a stake in the refinery, but no deal has been sealed,' the source said.

A CNPC spokesman could not be reached for comment yesterday.

News of CNPC's signing of the deal came after listed unit PetroChina obtained approval from Beijing on Friday to take a 49 per cent stake in Nippon Oil's refinery in Osaka, which has capacity to process 115,000 barrels of crude oil per day.

Last month, PetroChina reportedly expressed interest in buying a stake in Scotland's sole refinery from a heavily indebted British chemical company as the oil giant continued to look for discounted overseas assets.

In late May, it agreed to pay about US$1 billion for a 45.51 per cent stake in Singapore Petroleum, which has a daily crude processing capacity of 285,000 barrels.

Mirae Asset Securities regional energy analyst Gordon Kwan said CNPC's move in Malaysia was to hedge the risk that Beijing would exercise price controls on domestic fuel should oil prices soar again.

CNPC was compensated last year for losses incurred in importing refined fuel to satisfy domestic demand, but not for its domestic refining losses.

Hedging risk

Merapoh estimated in late 2007 that the deal would be worth, in US$ a year: $6b

Share

For unlimited access to:

SCMP.com SCMP Tablet Edition SCMP Mobile Edition 10-year news archive
 
 

 

 
 
 
 
 

Login

SCMP.com Account

or