January 11, 2011 / 11:16 AM / 7 years ago

PetroChina's Ineos buy shows trading ambition; eyes Americas

BEIJING, Jan 11 (Reuters) - PetroChina's move to buy into two refineries in France and Scotland belonging to British firm INEOS is a further step for the Chinese oil giant to become an integrated global oil major and trading powerhouse that will rival ExxonMobil and Royal Dutch Shell RDAa.L, analysts said on Tuesday.

PetroChina , the world's second most valuable energy firm and China's second-largest refiner, may be eyeing refineries in the United States next, while domestic rival Sinopec is most likely to follow it in buying refining facilities overseas.

"They want to have an overall strategy to be a global integrated company and buying a refinery allow them to actually integrate their global product trading operations," said Victor Shum, senior partner at Purvin & Gertz.

"Having a refinery allows them access to physical infrastructure and also production barrels. It's just like ExxonMobil, but maybe better," Shum said.

"So far, they have stakes in two refineries each in Asia and Europe, but not in the U.S. yet. So they may be eyeing the U.S. where many refineries are potentially up for sale," he said.

The framework deal between PetroChina and INEOS will allow the formation of refining ventures at the Lavera refinery in France and Grangemouth in Scotland, which have a total refining capacity of 420,000 barrels per day (bpd).

The joint venture will be the third overseas refinery deal for PetroChina after its refinery acquisitions in Singapore and Japan with a combined investment of more than $2 billion. [ID:nTOE70905Q]

EYEING AMERICAS

The move adds to speculation that an even bigger purchase may be brewing in the Americas, where oil demand is shrinking but trading opportunities abound for a company that has overtaken rival refiner Sinopec amid Beijing's drive to exert more influence over global commodity markets.

"The obvious next step for Petrochina is to secure a position in North America through a joint venture with, or acquisition of, a U.S. refining company," Bernstein Research said in a research note.

"Ultimately we believe that Petrochina's strategy is to secure a global downstream position which will underpin a material global trading business," it said.

It added that if PetroChina is successful in building a global oil trading company, it could expect additional earnings of $2.0-$3.0 billion per year.

Bernstein and other sources did not name a likely refinery target. But analysts said China's entry into the downstream market in the United States would be less controversial than an upstream purchase.

With Beijing maintaining a tight grip over domestic Chinese fuel prices, allowing refiners only a narrow fixed margin, buying refineries abroad could give it exposure to an upswing in the global economy, particularly with assets cheaper and competition less fierce at the moment.

"To be a globally integrated company will help PetroChina reduce potential risk in refining losses," said Wang Ao Chao, head of Research at UOB in Shanghai.

"Having this refining facility will also make it easier for PetroChina to buy more upstream assets in Europe."

Sinopec, Asia's largest oil refiner, is the most likely to follow PetroChina in buying refineries abroad, while China's largest offshore specialist CNOOC will more likely to keep its shopping spree in upstream assets.

"PetroChina and Sinopec are already direct competitors in bidding for some downstream assets abroad," Wang said.

Last week, CNOOC said it plans to invest between 800 billion and 1 trillion yuan ($121-$151 billion) over the next five years to boost production and expand overseas, without saying how much would go into acquisitions and how much into capital expenditure. [ID:nTOE70401N]

(Additional reporting by Florence Tan in SINGAPORE; Editing by Michael Urquhart)

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