France’s Total is in talks with PetroChina to sell its stake in a Chinese refinery after nearly two decades of investment, in what could be the latest foreign energy firm giving up on a vast but tightly regulated oil market in China. Early this year, sources said BP was dropping plans to invest in another PetroChina refinery in southern China, mirroring the moves of several other projects that worried about a slowdown in growth in the world’s second-largest economy.
Total was the first foreign firm to get a toehold in China’s refining business, as an investor in the 200,000 barrels-per-day West Pacific Petrochemical Corp (WEPEC) in the northeastern port city of Dalian in the mid-1990s. The plant was then designated as the country’s first and only export-oriented refinery. The French firm owns 22.4 percent of the plant which started operations in 1996. It’s jointly owned by state-run Sinochem Corp and firms backed by the Dalian city government, but PetroChina manages and operates it. Industry officials familiar with WEPEC’s operations said the French firm has decided to divest the refinery stake due to years of losses the plant incurred, and also due to lack of access to the local Chinese market.
“Exports of most of WEPEC’s fuel are making losses, due to heavy taxes levied,” said an industry official with direct knowledge of WEPEC’s fuel marketing. “Now it’s time to revamp the plant as facilities are old, to produce cleaner fuels. And that requires new investment from investors, I believe the French could not stand it any more,” the industry official said. A Total spokesman in China was not immediately available for comment.
PetroChina has held talks with Total on the potential purchase of the latter’s stake in WEPEC, PetroChina’s parent company China National Petroleum Corp (CNPC) said on Wednesday. PetroChina President Wang Dongjin met a Total vice president on Tuesday, CNPC said on its website (news.cnpc.com.cn). “Both sides exchanged views on domestic and overseas upstream projects and a stake transfer in the WEPEC refinery,” it said.