State-owned oil giants Shandong melee

On the oil map, the Shandong market has always been the game of Sinopec with many local refineries. Since 2008, China National Chemical Industry Group and China National Offshore Oil Corp. have successively acquired land in Shandong and acquired refineries.

Today, PetroChina also came. Different from the above two central enterprises, PetroChina has stepped into Shandong to a greater extent - using oil as a bait and wanting to cooperate with more than a dozen local refineries in purchasing and selling crude oil and refined oil products. This means that the Shandong Corps, which accounts for more than 60% of the total capacity of private refineries in the country, will be transformed into a PetroChina processing plant.

With the gradual disappearance of private enterprises in the petroleum system – not being a subsidiary of a central SOE, is the transformation of giants' processing plants. Some private gas stations worry that the only source of refined oil purchases will be lost.

Change of pattern

“The upcoming cooperation between Shandong local refineries and PetroChina is a commercial type, not an acquisition of assets.” For the recent rumored that PetroChina wants to acquire a number of refineries in Shandong, Tan Shaohua, deputy director of the Shandong Provincial Oil District Working Office, clarified.

Although this cooperation, which has caused widespread concern, is still under development, according to the preliminary agreement, PetroChina and several refineries in Shandong will co-finance a new company, Shandong Provincial Refining Investment Co., Ltd. The registered capital of the company will reach 1 billion yuan. Among them, the Shandong Provincial Oil District Office, which is responsible for the lead, represents 150 million yuan on behalf of the government, and “PetroChina requires control.”

The mode of cooperation between the two parties is that CNPC will help the company apply for crude oil import qualifications to the country. The company will purchase crude oil for the Shandong refinery, and refined oil processed by the company will be sold on behalf of the company.

"Oil source is the lifeblood of every local refinery. It is suffering from the lack of crude oil. Over the years, the local refineries have been struggling with their lives." Yuan Yongkui, deputy general manager of Yanli Petrochemical, sighed.

Since the country's clean-up and rectification in 1999, Shandong Province has retained 21 refineries, the largest number and largest capacity in the country. At the beginning, the national crude oil index allocated to these refineries was 1.7 million tons/year. After years of expansion, the capacity of Shandong refineries has been expanded from 26 million tons to 80 million tons, but this indicator has not yet been moved. In desperation, the refinery in Shandong can only be replaced with fuel oil, but the quality and the high cost of the refined oil make it unable to compete with the three major oil giants at the same level.

An insider from the Office of the Oil District of Shandong Province stated that the reason why the government participated in the investment is because this cooperation was part of the strategic cooperation between the Shandong provincial government and PetroChina.

On the afternoon of July 28, 2010, the Shandong Provincial Government signed a "cooperation framework agreement" with PetroChina. According to the agreement, the two sides will cooperate fully in oil and gas pipeline networks, oil refining, refined oil sales networks, city gas, oil and gas storage and transportation projects including ports and terminals.

Similar to the above two central SOEs, CNPC entered into a strategic cooperation agreement with the Shandong provincial government. After all, many refineries are still state-owned or holding shares. The difference is that CNPC no longer uses acquisition as a means of cooperation.

There are three ways for central enterprises to enter Shandong: As early as 2007, CNPC once attempted to build a 10 million-ton oil refinery project in Weihai Chengdao to enter Shandong. However, the project has not been approved so far; instead, it is old. The opponents China National Chemical Industry Group and China National Offshore Oil Corp. took the lead in grabbing the beach.

Shandong Petrochemical has a total of 80 million tons of crude oil processing capacity, and a few companies have even reached the 10 million tons of production capacity that the three major oil giants have. This is a civilian force that no one can ignore.

However, this method also has its disadvantages. The acquisition of a refinery takes a long period of negotiations. It involves time and effort in terms of purchase price, employee placement, and technical capital investment. Since 2008, CNOOC has only acquired Shandong Haihua and Zhonghai Chemical's two refineries in Shandong. CNPC, through its joint venture company and Daigou sales agency, can form an alliance with more than 10 refineries in the short term.

One statement pointed out that Shandong hopes to participate in this cooperation with the remaining refineries (except refineries acquired by China National Chemical Corporation and CNOOC). However, there are rumors in the market that CNPC wants to choose only 6 companies that are more powerful.

Disappeared

Although China introduced a "new 36 article" in 2010 to encourage and guide private investment, many experts in the field still believe that only PetroChina's participation can obtain the qualification for importing crude oil.

Liu Aiying, president of the Shandong Petroleum Refinery Association, said that as early as 1999, local refineries and petrochemical companies in Shandong province voluntarily participated in the establishment of Shandong Petrochemical Company. One of the company's main tasks is to compete for crude oil import qualifications. It has been more than a decade and it has not been able to do so.

The giants of the central SOEs are seeing this. A related manager of PetroChina believes that this cooperation will be a win-win result. The Shandong Provincial Government has promoted this cooperation in the hope of further strengthening energy protection for regional development. Local refineries can also get the crude oil they dream of. PetroChina has taken a fancy to the development prospects of the Shandong market. The person admitted that PetroChina is relatively weak in this market and hopes to use this cooperation with the local refining to develop this market.

Yuan Yongkui, the deputy general manager of Yanli Petrochemicals, also expressed the views of many local practitioners. In terms of local refining, the most troublesome thing is that there is no oil source. If the oil source is obtained through cooperation with CNPC, the company’s profits and future development will be guaranteed. Moreover, this cooperation does not involve the acquisition of companies.

Zhao Jingmin, an analyst at China Chemical Network, pointed out that according to the cooperation model between PetroChina and local refineries, the oil source is provided by the joint venture company, and refined oil products are sold on a consignment basis. This is essentially a generation processing model. Many Shandong refineries will become processing plants of PetroChina.

In fact, when the oil shortage occurred in November 2007, the oil giants were unable to cope with it, and Shandong's refining industry had a large amount of idle capacity. Sinopec's unprecedented increase of 500,000 tons of crude oil targets has been transferred to local refining and processing. The processed oil products have been recovered by Sinopec.

After the merger of the giants of the central enterprises, the number of privately-owned refineries remaining in the country is decreasing. According to statistics from Treasure Island, CNOOC Limited has more than 5 million tons/year of processing capacity in the local refining, and China National Chemical Industry has approximately 19 million tons/year of refining capacity in the local refining, and Sinochem has 5 million tons/year. Annual refining capacity.

The refinery is the middle part of the entire petroleum system, and the downstream is connected with the sale of refined oil. In the past, the low price of Shandong refined petroleum products was the main source of supply for private gas stations throughout the country. For example, in 2009 and 2010, the oil chambers of Guangdong, Hebei, and other provinces came to Shandong to purchase a large number of products when the supply of refined oil was the most intense.

The capacity of Shandong refining is fixed, and the output of refined oil is supplied to China National Petroleum Corporation. The quantity of oil flowing to private gas stations will inevitably decrease. “Why must we hold the thighs of the giants of the central SOEs in order to obtain the oil source?” The owner of the road in the Zunhua Yuanfeng gas station in Hebei is worried that once the Shandong refinery has turned into a processing plant for the central enterprises, the only oil product purchase channel is available. Will also lose.

Once upon a time, Shandong was once the stage where regional refineries competed with Sinopec. Now it is only an arena for the giants of the Central Enterprises.