Six Chinese teapot refiners have registered a US$5 billion (33 billion yuan) joint venture to pool funds and investments in order to compete with state-owned giants in an oversupplied domestic fuels market.
The joint venture is called Shandong Refining & Chemical Group, and has six independent refiners and a fund backed by the Shandong province as shareholders, Zhang Liucheng, a vice president at China's biggest independent refiner, Shandong Dongming Petrochemical Group, told Reuters on Tuesday.
Shandong Dongming is the biggest shareholder in the new alliance with a 22.63-percent stake. The second-largest shareholder with a 22.59-percent interest is a fund managed by Shandong Marine Group, which is backed by the Shandong province, home to more than 70 percent of China's teapots.
At the beginning of September, the Shandong province approved a request by the largest independent oil refiners to set up a refining conglomerate to boost their coordination amid fierce competition from state refiners. A group representing major teapots in the Shandong province had requested to create the conglomerate in July this year.
The teapots have been instrumental for China's crude oil demand growth during the oil price crisis, but have also undermined the dominance of the state-owned companies.
In June this year, China allowed a second batch of crude oil import quotas for independent refiners and some state-held companies for 2017, setting full-year quotas at a total of 91.73 million tons, or 1.83 million bpd.
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Apart from Shandong Dongming, the new joint venture includes Shandong Qingyuan Group, Shandong Tianhong Chemical, Shandong Shouguang Luqing Petrochemical, Wudi Xinyue Fuel and Chemical, and Shandong Shengxing Chemical. Shandong Dongming's subsidiary Jiangsu Xinhai Petrochemical is also a shareholder.
The seven refineries that the alliance members own have combined government-approved crude oil import quotas of around about 460,000 bpd, while the combined refining capacity is some 661,000 bpd.
By Tsvetana Paraskova for Oilprice.com
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