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PetroChina buys oil refiner

BEIJING, May 25 – Oil major PetroChina said Monday it had agreed to buy nearly half of refiner Singapore Petroleum Co. for 1.02 billion dollars in China\’s latest move to secure resources for its energy-hungry economy.

PetroChina, the listed unit of the nation\’s biggest oil and gas producer, said in a statement it intends to acquire 45.51 percent of the Singaporean company\’s issued share capital at a premium on the market price of 24 percent.

The statement to the Hong Kong Stock Exchange added PetroChina will make an offer for the rest of the company upon completion of the deal.

"SPC will become a new platform for the implementation of our international strategy and will provide a broader foundation and stable path for development," PetroChina said on its website.

The deal is the latest high-profile bid by China, which sits on 1.9 trillion dollars in foreign exchange reserves, to fuel its economy, which is now the world\’s third-largest.

This month alone has seen a 10-year Chinese agreement with Brazil for the import of eventually 200,000 barrels of crude a day, as well as a pledge by Venezuela to increase oil exports to China eight-fold within "a few years".

PetroChina bought the shares in SPC from Keppel Oil and Gas Services, part of Singapore-based conglomerate Keppel Corp., according to PetroChina\’s statement to the Hong Kong Stock Exchange.

SPC, a regional energy company with interests in petroleum refining and marketing, owns a 50 percent stake in Singapore Refining Co., one of city-state\’s three major petroleum refiners, PetroChina said.

The Chinese firm added that Singapore Petroleum Co. is engaged in oil and gas exploration, with production properties in China, Indonesia, Vietnam, Cambodia and Australia.

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PetroChina, a unit of China National Petroleum Corp., was likely to benefit significantly from its new presence in Singapore, analysts said.

"This gives them a tremendous amount of flexibility," said Jason Feer, a Singapore-based analyst with Argus Media, a provider of business intelligence for the energy sector.

"If you refine a barrel of crude in China, then all of the products are in China and you have to pay an export tax to export them," he said.

"So now they can just refine what they need in Singapore, bring that product into China and then export the rest out of Singapore and not be subject to Chinese taxes and restrictions on exports."

In addition, Singapore\’s key position in Asia\’s oil product market was a boon for PetroChina, as it sought to develop its business, according to analysts.

"It is a large oil products distributing centre and it has an oil product exchange, which is significant in terms of the pricing power," said Wang Jing, a Shanghai-based analyst with Orient Securities.

She added that the agreement would give PetroChina an advantage vis-a-vis China\’s other energy giant Sinopec, Asia\’s largest refiner.

"PetroChina has been strong in the upstream business while weaker than Sinopec in refining and sales in the country," she said.

"So the takeover will probably strengthen PetroChina\’s competitiveness in the middle and downstream businesses," she said.

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