Sinopec plans to offer larger access to markets to overseas partners

01-Jun-05

In 2004, oil and petrochemical imports in China accounted for about 60% of consumption, indicating an increasing shortage of refined products on the mainland. Triggered by the rising supply crunch, the mainland's oil an petrochem major China Petroleum and Chemical Corp (Sinopec) seems willing to consider a compromise in a bid to win the backing of foreign partners. A project to triple the output of Sinopec's Fujian refinery to 240,000 bpd and build a 800,000 tpa ethylene plant by 2008, was first discussed when China was concerned about excess capacity. Over the years, the booming Chinese economy has increased consumption levels, and currently China is behind the demand curve. After years of talks, the project was revived last year, with the partners subsequently signing a preliminary project management agreement. However, dissatisfied with the market access offered by Sinopec, which was limited to Fujian province and completely excluded Guangdong, Exxon and Aramco have refused to sign a final agreement. Booming demand is exerting tremendous pressures, and in a bid to win backing from foreign investors for its planned US$3.5 billion (HK$27.3 billion) refinery and petrochemical project, Sinopec is likely to give its partners greater access to the local market. Sinopec is offering its foreign partners the right to sell products in 3-4 districts in eastern Guangdong near the border with Fujian. If the new terms are acceptable, then a final investment agreement is likely be signed by the end of the year, with Exxon and Aramco each owning 25% and Fujian Petrochemical Company, (a 50-50 joint venture between Sinopec and the Fujian provincial government) holding the rest.