CNPC and Sinopec List Assets for Transfer CNOOC Plans Restructuring      

China National Petroleum Corporation (CNPC) and China Petrochemical Corporation (Sinopec Group) have put certain assets up for sale on the assets and equity exchanges in Beijing and Shanghai lately. The assets are involved in a range of industries from financial, farming, forestry and fishing, petroleum and petrochemical as well as lodging and catering and spread all over Henan, Guangdong and Shandong provinces, Beijing and Shanghai according to the two exchanges.
    On November 26th, CNPC put up for sale its 30% stake in the Zhongyou Huaihai Sales Co., Ltd. on the Shanghai United Assets and Equity Exchange for RMB31.87 million. Zhongyou Huaihai, which engages in oil and gas exploration, had sales of RMB251 million, operating profit of RMB9.3 million and net profit of RMB6.2 million in 2007.
   A day after, PetroChina Co., Ltd. (SH: 601857), a list arm of CNPC, listed its 40% stake in Yingjiang Zhongyou Zhenlong Co. for a consideration of RMB1.3 million on the China Beijing Equity Exchange. According to the exchange, Yingjiang Zhongyou, with registered capital of only RMB2.78 million, is a small-sized company part-owned by the government. PetroChina is the second largest shareholder in Yingjiang Zhongyou with a 40% stake. As of April 30th, 2008, Yingjiang Zhongyou's assets totaled RMB5.36 million while net assets stood at RMB3.65 million. In the first half of 2008, the company posted a net profit of RMB15 500 on core business revenue of RMB214 000.
   PetroChina also put on sale three gas-station operation companies via the Beijing equity exchange's website. They are the 100% stake in Dalian Economic & Technical Development Zone Liquefied Petroleum Gas Co., Ltd. with a listing price of RMB71.69 million, the 75% stake in Shanghai Zhongyou Taihe Gas Station Co., Ltd. with a price of RMB4.56 million and the 35.64% stake in Shanghai Youqi Bailianjing Gas Station Co., Ltd. at RMB1.33 million.
   While selling such gas station assets is a way to adjust market distribution and to further regulate market order, industry insiders said controlling the end-user market of refined oil products is still the effective way for companies to gain competitiveness.
   PetroChina officials said the asset sale is part of the company's normal operation adjustment and the gas station business is part of the company's operation. PetroChina acquired a large number of fuel sales assets from CNPC in the first half of the year, which included the three companies that were put on sale. The assets sale could lead to more efficient operation for PetroChina.
   Sinopec Group is also active in assets restructuring. Earlier on November 10th, 2008, Sinopec Group listed the entire of Beijing Petroleum Changli Gold Coast Sanatorium for RMB7 million. Changli Gold Coast is involved in accommodations and catering which are far away from Sinopec Group's core businesses.
   In addition, Sinopec Group is resolute in peeling off financial assets. On November 25th, 2008 Sinopec Group announced to dispose of its 1.05% stake (10.5 million shares) in United Securities Co., Ltd. with a listing price of RMB22.79 million. Sinopec Group said that United Securities is a A-class AA-level securities brokerage house rated by the regulators and its comprehensive strength is in the front rank among domestic brokerage firms. It had sales revenue of RMB3.87 billion, operating profit of RMB1.85 billion and net income of RMB1.29 billion in 2007.
   Something to notice is that some of the assets to be sold by the two companies are relating to oil, gas and chemical businesses, including CNPC's 30% stake in Tianjin Dagang Oilfield Bohong Petroleum Chemical Co., Ltd., 51% stake in Jilin Shuangji Chemical New Materials Co., Ltd. and 10% in Jinan Zhongyou Huatie Petroleum Product Sales Co., Ltd. in addition to those mentioned above.
   Industry watchers believed such divestment would directly prompt Sinopec Group and CNPC to aggressively expand and boost their competitiveness. At present, CNPC is perfecting its industry chain - petroleum exploration and production-refining-petrochemicals production, while Sinopec Group is also counting on expansion in size and improvement in structure.
   China National Offshore Oil Corporation (CNOOC), China's third largest oil company, is mulling a huge asset restructuring and consolidation plan. "If everything goes smoothly, all dust will settle for detailed plan in March or April 2009," an informed source said.
    CNOOC is expected to conduct strategic reorganization among several of its wholly-owned subsidiaries to form a large scale integrated group with business across upstream refining to downstream sales. So far companies involved in the plan include China Offshore Oil & Gas Development & Utilization Co., Ltd., CNOOC Oil Product Sales Co., Ltd. and the refining complex in Huizhou, Guangdong province.
   The new group's business will cover refining, petrochemical product trading, bitumen and fuel oil processing after the restructuring. The initial plan for the new group is to use the Huizhou complex as a base, integrating China Offshore Oil & Gas Development & Utilization Co's advantages in oil and gas exploration and the production of mid-stream petrochemical products like bitumen and CNOOC Oil Product Sales Co.'s experiences in petrochemical imports and exports.
   The progress of the restructuring plan would depend on the time of start-up of the Huizhou complex, the source said. But one thing for sure is the restructuring plan would be carried out before the Huizhou plant is on stream.
   CNOOC general manager Fu Chengyu told the media in middle September 2008 that the start-up of the Huizhou plant, based in Guangdong province and also the CNOOC's first largest refining project, would be delayed to 2009.
   Analysts said the project is one key effort for CNOOC to strengthen its refining business. The 12 million t/a refining and petrochemical complex will supply refined oil products and chemical products to Guangdong province and the rest would be sold within the group.
   Meanwhile, the core business of China Offshore Oil & Gas Development & Utilization Co., Ltd. is the manufacture and marketing of bitumen and fuel oil, with an annual production capacity of 3 million tons and 5 million tons respectively. It has over 50% market share in domestic bitumen market. According to incomplete statistics, China Offshore Oil & Gas Development & Utilization has several projects under construction including a RMB823 million site in Yingkou of Liaoning province for the so-called heavy traffic paving petroleum asphalt, and a RMB5 billion asphalt and lubricant project in Taizhou of Jiangsu province and a 3 million t/a asphalt plant in Shantou, Guangdong province.
    "China Offshore Oil & Gas Development & Utilization Co.'s production and that of the Huizhou complex complement each other," the source said. More importantly, the newly established CNOOC Oil Product Sales Co.'s sales network provides a channel for storage, sales and exports for these many petrochemical derivatives.
    CNOOC Oil Product Sales Co., Ltd. was established in conjunction of the merger of China National Chemical Construction Corporation (CNCCC) and China National Chemical Supply & Sales (Group) Corporation (CNCSS), mainly focusing on chemical product exports and refined fuel distribution.
   CNCSS owns a 40 000 tonnage liquid chemicals, liquid petroleum and gas port, 116 000 cubic meters of storage tanks, 64 600 square meters