October 12, 2008

CNPC and Nippon Oil form refinery joint venture

China Daily reported that China National Petroleum Corporation has signed an agreement with Nippon Oil Corporation to build a refinery to tap the growing Asian demand. It will have a processing capacity of 115,000 barrels per day.

CNPC said that the two sides also signed an agreement to use the Japanese refiner's surplus capacity. Nippon Oil has increased the amount of oil it refines for CNPC to 70,000 barrels per day, from 20,000 barrels per day in 2004. It said the cooperation with Nippon Oil is the largest cooperation program between China and Japan in the energy area in recent years.

Mr Shinji Nishio president of Nippon Oil said that Nippon Oil the refining venture would be in Osaka and CNPC will take a 49% stake. CNPC will be in charge of crude procurement and product sales, and Nippon Oil will be in charge of operations and management.

Analysts said that the deal will increase CNPC's oil refining capacity to better meet increasing domestic demand. The company plans to increase its share of the domestic oil refining market to 45% by 2020 as demand for fuels and chemicals rise.