Sinopec Plans to Construct Large Oil Refinery Project in Singapore

Corporation, page 26, issue 465, April 19, 2010 
Translated by Liu Peng
Original article:[Chinese]

Chinese oil giant Sinopec Corp plans to build a comprehensive petroleum and chemical base on Singapore's man-made Jurong island.

The move appears to be an attempt to make use of Singapore's geographical advantages in order to enhance Sinopec's oil refining capacity and expand the company's crude oil reserves.

A senior official from the Singapore Economic Development Board (EDB) told the EO that Sinopec has contacted the board many times to negotiate the establishment of the new petrochemical project.

The EO learned that the project includes space for storing crude oil reserves, an oil refinery and lubricant production base.

The project still requires approval from Chinese regulators.

The official quoted above explained that Sinopec selected Singapore as its strategic base not simply because of the country's geographical advantage but also because of its strategic role in global oil trade.

Actually, Sinopec's plan began to take shape three months ago. On January 11th, China's National Development and Reform Commission (NDRC) announced on its website that it had approved Sinopec's application to invest in the construction of a lubricant project in Singapore.

The Sinopec dubbed its lubricant investment as the "Golden Triangle Plan" and planned to carry it out in three steps. The first is to focus on developing the Asian-Pacific market, and then to establish factories overseas. The final step is to gradually establish global networks for distribution and after-sales service.

The construction of the base will lead to a greater presence of the Chinese petroleum giant in Southeast Asia.

Sinopec plans to develop markets in America, Europe, and Southeast Asia, the EO learned.

The company's lubricants has entered 40 countries and regions, with its sales overseas growing at an average annual rate of 45 percent.

In addition, the high prices that crude oil was fetching on the international market over recent years encouraged Sinopec to start planning to establish a base for its crude oil reserves quite early.

An industry expert said that another important reason for Sinopec to invest in the country was that Singapore is the international hub for oil futures trading and the largest fuel oil trading market in the world.

The new base may also mean a greater role for Sinopec in the global crude oil futures trading.

If Sinopec builds refineries in Singapore and stores processed oil there, the company can make enormous profits on any future surge in the price of oil futures, the above expert added.

China's largest oil producer PetroChina, has also made a foray into the Singapore market. In June last year, PetroChina spent some 1.02 billion US dollars in exchange for a 45.51 percent stake in the Singapore Petroleum Company from Singapore Keppel Corporation.

An anonymous expert noted that if Sinopec's ambitions can be realized, the outline of the strategic plan of the two Chinese oil giants in Southeast Asia will become a lot clearer.

This article was edited by Paul Pennay