China National Offshore Oil Corp (CNOOC) has identified five small refineries in Shandong province as takeover targets as the nation's third-largest oil producer aims to become an integrated oil firm, a mainland newspaper reported. The acquisition targets were Fuhai Group, Kenli Petrochemical, Zhonghai Chemical, HaiKe Group and Shandong Shida Technology Group, each with annual oil processing capacity of between one million and two million tonnes, the Economic Observer said. The paper did not give financial details for the transactions. CNOOC was also in talks with two bigger plants in Shandong - Lihuayi Group and Shandong Hengyuan Petrochemical - each with an annual oil processing capacity of 5.5 million tonnes, the report said. If all the acquisitions go ahead, the parent company of Hong Kong-listed CNOOC could have 20 million tonnes of annual oil processing capacity in Shandong, a challenge to the leading position of Sinopec Group, the mainland's top refiner, in the eastern province. 'It is an excellent opportunity to buy local refineries in Shandong as domestic refined oil product prices are lower than crude oil prices and the country frequently suffers from fuel shortages,' the newspaper quoted company spokesman Liu Junshan as saying. Most small refineries have reduced or even suspended operations under pressure from oil shortages and crude oil, which has been trading above US$100 per barrel. Only 33 per cent of Shandong Shida Technology's 1.5 million tonne annual oil processing capacity was operating because of insufficient oil supply, the newspaper said. CNOOC in January signed a framework co-operation agreement with Shandong provincial government on refining, fuel storage and logistics facilities. The Beijing-based company planned to deliver crude oil from Bohai Bay to refineries in Dongying after the acquisitions. The oilfield would pump 30 million tonnes of oil by 2010, the report said. CNOOC is expanding its downstream operations to become an integrated oil firm. Its first wholly owned major refinery in southern China, a 21.8 billion yuan plant in Huizhou, Guangdong, is set operating in October with an annual processing capacity of 12 million tonnes.